Arkansas ‘Private Option’ Model Doesn’t Make Sense for Pennsylvania

As readers of SayAhhh! know, Governor Corbett of Pennsylvania is currently revising a Section 1115 Medicaid waiver proposal to extend Medicaid coverage to the newly eligible low-income adults in his state. That would be great news if it weren’t such a problematic proposal (as I have blogged about before). The state took public comments on the proposal and a new version is expected out soon.

One of the key features of the Corbett proposal (in the version that we have seen to date) is to use the approach pioneered by the state of Arkansas in its Medicaid expansion (often called the “private option”). This involves purchasing private insurance coverage for the newly eligible in the federally facilitated marketplace with Medicaid dollars. As I pointed out in my previous blog, this model does raise some questions, but in Arkansas it is a sincere attempt to provide good coverage to the most vulnerable Arkansans in a new and different way.

The Arkansas model has provoked a lot of discussion, and PA is not the only state considering it – just the other day New Hampshire’s Governor announced a conceptual agreement on a Medicaid expansion that likely includes some variant of the Arkansas plan. But as I was thinking more about whether this was a good fit for Pennsylvania, I came across an interesting finding from a study done by the Association of Community Affiliated Plans (ACAP) last December. The study looked at the overlap between insurance companies that operate in the Medicaid managed care market and those that are offering qualified health plans in the new exchanges. Here is what the study found:

“States range from having zero to 100 percent overlap between QHP issuers and MCOs. While 18 states have 0 percent overlap, only one state, Hawaii, has 100 percent – both of Hawaii’s QHP issuers also operate MCOs. The second highest overlap is in Minnesota and New Mexico (both 80 percent), followed by Wisconsin (77 percent), Indiana (75 percent), Pennsylvania (75 percent), and Texas (73 percent).”

Arkansas is a state that has no overlap between QHP issuers and Medicaid MCOs, because Arkansas is one of the rare states that has no Medicaid managed care. So using the exchange for its new Medicaid coverage really does effectuate some delivery system change and moves Arkansas’s Medicaid program towards more of a private insurance model (whether you think that is a good thing or not is another matter!).

Pennsylvania, on the other hand, is a state with a very mature Medicaid managed care market that is well regarded nationwide. Geisinger Health Plan, many of the Blues, UPMC,  and HealthAmericaOne are all operating in both markets according to the ACAP analysis.

So it makes little sense to assert that it would be better to pursue the Arkansas model in Pennsylvania to insert the private market into Pennsylvania’s Medicaid program. In reality, such an approach will merely make it more complicated for the state and beneficiaries alike to contract with the same companies. This is another example of how the Corbett plan simply adds red tape.

Governors like to say that they know best when it comes to their state’s Medicaid program. Governor Corbett should consider the very real differences between the existing Medicaid programs in Arkansas and Pennsylvania and make the right choice for Pennsylvanians. A better approach might be to encourage some of these issuers to offer “bridge plans” that could serve Medicaid beneficiaries whose income increases and necessitates moving out of Medicaid and into subsidized exchange plans.

We will blog about the revised Pennsylvania plan when it becomes available.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.