Arkansas: Costly Medicaid expansion by another name

Yesterday, the Oklahoma Legislature convened for the 2014 session, and Gov. Mary Fallin gave her "State of the State" address. One of the issues that is bound to come up again is whether eligibility Medicaid, the federally-funded health insurance program for low-income and disabled people, should be expanded. They need to learn some lessons from our neighbors to the east and their too-clever-by-half attempt to camouflage Medicaid expansion as a "private option."

Obamacare required states to expand eligibility for Medicaid, or else lose all federal Medicaid funding. The Supreme Court ruled the Medicaid expansion mandate unconstitutional, making expansion optional. Only 26 states have voted to take the bait. Under the Obamacare Medicaid expansion, the Federal Government would, for three years only, pay 100% of the difference in cost between the pre-Obamacare eligibility level and the new level. The reimbursement level would drop to 95% for three more years, than permanently settle at 90%.

Opponents to Medicaid expansion cite the high long-term costs imposed on the state and the impact on the federal budget. They worry about putting Oklahoma families behind a cliff of government dependency, where earning just a little bit more means loss of thousands of dollars in government benefits and a loss of disposable income.

Sen. Tom Coburn has pointed out that the Feds don't always keep their promises for future funding, and Congress could cut the reimbursement rate in later years. He also notes that Medicaid patients have fewer provider choices. Expanding Medicaid would shift Oklahomans who could afford better private insurance into government insurance

Last year, the Arkansas legislature, under Republican control for the first time since Reconstruction, passed something that its proponents claimed was a free-market alternative Medicaid expansion that avoided all these pitfalls. They called it the "Arkansas Private Option." The Foundation for Government Accountability has exposed it as nothing more than Medicaid expansion under another name, in an in-depth, but entertaining, report called "The Empty Promises of Arkansas's Private Option," by Jonathan Ingram.

What's clever about the report is the use of pull-quotes from the legislators themselves, taken from news stories, Facebook statuses, tweets, and floor speeches. Their promises and reassurances, used to pass the bill last year, are on display, tagged with their smiling official photos, right next to the reality that undercuts their empty promises.

Ingram points out that, despite the name, this is an expansion of Medicaid services using Medicaid dollars under the terms of the Obamacare law. Contrary to the claims of proponents, Ingram shows that the Private Option creates two steep cliffs that penalize a family that increases its income:

Instead of the sliding scale of cost-sharing its architects envisioned, there are two major tax cliffs within the Private Option. The first cliff occurs when an individual moves from just below the poverty line to just above it. An individual below the poverty line pays no premiums and no cost-sharing in the Private Option. But if the same individual earns one dollar more, he or she is suddenly subject to cost-sharing requirements that can add up to $604 per year.

The second, larger cliff occurs at the top of Private Option eligibility, when income exceeds 138 percent of the federal poverty level and wrap-around benefits no longer apply. An individual earning slightly under 138 percent of the federal poverty level pays no premiums and has an out-of-pocket spending cap of $604 per year. But if that same individual earns one dollar more, he or she must pay $522 per year in premiums. The cap on his or her annual out-of-pocket costs would also increase to between $754 and $2,117 per year. Depending on how much medical care the individual uses, he or she could end up paying between $672 and $2,035 more simply by earning one extra dollar. That individual could end up paying thousands more if he or she selected some of the more expensive plans that are covered by the Private Option.

He goes on to dismantle in detail the faulty assumptions behind proponents' claims of budget neutrality and lower premiums.

Oklahoma voters should heed the words of Nic Horton of the Arkansas Project:

Ingram's paper illuminates something that anyone involved in politics can't afford to forget: just because elected officials share your party label, you can't just assume that they'll share your values. Furthermore, you can't automatically rely on public officials, once elected, to work for the values they campaigned on.

Before Oklahoma legislators deliberate an unwise expansion of Medicaid, they should consider Arkansas's experience and the gap between promises and reality. They should ask themselves: "Do I want my smiling face and my words to show up next year in a report about empty promises?"

UPDATE: The New York Times reports that reauthorization of funding for the Arkansas "private option," which requires a 3/4th vote in each chamber, is in jeopardy because of political pressure. One Democrat has resigned and been replaced by a Republican who opposes Medicaid expansion, and one Republican, who had been a supporter and faces a tough primary, has withdrawn support, leaving reauthorization one vote shy in the House. (Via WSJ Best of the Web.)