The Razorback Alternative: Is Arkansas’ Medicaid Game Plan a Blueprint for Others?

Richard

Until recently, states had three apparent options for the Medicaid expansion:

1)       Do nothing

2)       Expand partially (probably to 100FPL)

3)       Expand fully (to 138FPL)

Arkansas Governor Mike Beebe claims to have an agreement with HHS Secretary Sebelius for a fourth option: fully expand coverage to 138FPL by using Medicaid funds to subsidize beneficiaries’ purchase of commercial (not managed Medicaid) coverage on the state’s health insurance exchange

Beebe (D) needs the support of a Republican legislature to expand; the exchange-based approach makes that support a very real possibility. Costs to Arkansas eventually would be much higher; after the state becomes responsible for 10 pct of expansion costs, the exchange-based approach would cost the state 6.4 pct more than expanding to 138FPL under traditional Medicaid

Interestingly, this exchange-based expansion option is more expensive for Arkansas than for any other state save Alaska. The Razorback option is all about politics, and has little or nothing to do with economics

If all states took the Arkansas approach, federal Medicaid spending would be 17 pct higher than if all states expanded to 138FPL traditionally – a near impossibility in the current fiscal setting. HHS can only use the Razorback option selectively; they cannot afford to make it available to all states

States’ increased acceptance of the full 138FPL expansion has much to do with Secretary Sebelius’ requirement that states participate in the full expansion in order to get enhanced federal matching – however this policy expires in 2016

At that point, states’ best option (still) would be to limit Medicaid eligibility to 100FPL, leaving persons and households between 101 and 138FPL to purchase coverage on the exchanges

HHS appears committed to making whatever deals are necessary to get full 138FPL expansion in as many states as possible – thus we need to think in terms of large Medicaid enrollment gains (at least through 2016) as we consider enrollment prospects for Medicaid HMOs, and Hospitals’ aggregate pricing power. After 2016, our money’s on 100FPL as an upper limit on Medicaid eligibility

For our full research notes, please visit our published research site.

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