October 1, 2013
By Steven Ross Johnson
The Obama administration’s approval last week of Arkansas’ plan to expand health coverage for low-income residents under the federal healthcare reform law bodes well for several Republican-led states looking to implement their own alternative models for expanding Medicaid.
Last week, the CMS granted Arkansas a Medicaid Section 1115 waiver that allows the state to move forward on its plan to use federal funding available under the Patient Protection and Affordable Care Act to buy private health plan coverage through the state’s new insurance exchange in 2014 for adults with incomes up to 138% of the federal poverty level. The federal government will pay 100% of the cost for the first three years, then 90% after that.
Arkansas Gov. Mike Beebe, a Democrat, proposed the private plan model as an alternative way to expand coverage for low-income residents because the Republican-controlled legislature opposed the reform law’s expansion of Medicaid. Similarly, Republican governors and lawmakers in other states such as Michigan, Pennsylvania and Iowa are asking the CMS to allow alternative models for expanding coverage, which influential hospital leaders badly want to provide a payment source for uninsured patients. But some of those plans include cost-sharing and other features that could make it difficult for the Obama administration to approve them.
Under the Arkansas model, new recipients between 100% and 138% of the poverty level would be required to pay up to 5% of their income annually in cost-sharing, consistent with the Medicaid state plan and marketplace health plan rules.
The Arkansas plan marks the first time the CMS has granted a waiver for a state to buy private coverage as an alternative to the Medicaid expansion authorized by the ACA.
“With the Arkansas Private Option, Arkansas set an example that is still garnering national attention,” Beebe said in a radio address last week. “Instead of railing against the federal government, we found a way to work within the system.”
Approval of the Arkansas’ Medicaid alternative has potentially opened the door for other states that were on the fence about expanding Medicaid or refused to do so. Rejecting the Medicaid expansion means those states will lose billions of dollars over 10 years that instead will flow to other states.
“If we get to the round two states—states that didn’t immediately move ahead to accept the federal money—I think it’s certainly going to be a topic of discussion,” said Joan Alker, executive director for the Center for Children and Families at Georgetown University’s Health Policy Institute. “But how many states will actually go this route is hard to say.”
The CMS is reviewing a similar model proposed by Iowa. Alker thinks Iowa’s proposal will receive federal approval.
In Iowa, new enrollees with incomes between 100% and 138% of the federal poverty level would be eligible to take part in the Iowa alternative, while those making below 100% would receive coverage under the traditional Medicaid program.
Participants would have to pay a premium of $20 a month plus a $10 co-pays for all nonemergency use of the hospital emergency department.
According to Judith Solomon, vice president for health policy at the liberal-leaning Center on Budget and Policy Priorities, another difference between the Iowa and Arkansas plans involves wrap-around Medicaid benefits, which under the Arkansas plan are maintained. That would not be the case in Iowa.
“So Iowa kind of has the private option but for a smaller scale of people, but at the same time they want to eliminate some of the Medicaid benefits that people would get, and Arkansas is not doing that,” Solomon said.
Research has shown Medicaid charging higher out-of-pocket premiums prevented many low-income people from participation in the program.
Another state that may propose a private plan expansion option is Pennsylvania, where Republican Gov. Tom Corbett recently proposed to expand its Medicaid program despite opposition from the GOP-led legislature. According to state law, Corbett was able to bypass the legislature for a plan he has yet to submit to the CMS.
Like Arkansas and Iowa, Pennsylvania will seek to expand Medicaid through a premium assistance model, but the details concerning the payment model have yet to be released by state officials. One provision in the Pennsylvania proposal that could jeopardize its approval by the CMS is a requirement that unemployed adults get a job or participate in a job training program to qualify for the new coverage.
Other states such as Utah, Tennessee, New Hampshire, Ohio and Florida may also develop private plan options for expanding Medicaid, Solomon said.
21 states will see increase in Medicaid payments in 2015
New personal income data will effectively increase Medicaid grant funding in 21 states while payment in 17 will decrease, according to a new report in the Oct. 1 online issue of Health Affairs.
According to a recalculation of the Federal Medical Assistance Percentages using personal income data from the Bureau of Economic Analysis, states slated to receive the biggest increase were Missouri, Nevada, Arizona and Colorado and Georgia.
States expected to see the biggest declines in Medicaid payments included Iowa, South Dakota, Oklahoma, Pennsylvania and Delaware.
The FMAP, the matching rate the federal government pays as its share of a state’s Medicaid benefit costs, is adjusted annually.
