Arkansas Surgeon General Dr. Joe Thompson says the new Medicaid option for the state may need a more accurate name, and he says that avoiding a federally-run insurance exchange could help Arkansans avoid a costly tax.

In a lengthy interview with Talk Business Arkansas, Thompson walked through the mechanics of the flexibility approved for the state Medicaid program by U.S. Secretary for Health and Human Services Kathleen Sebelius.

The new scenario presented to lawmakers on Tuesday would allow the state’s portion of money for Medicaid expansion to be used in the forthcoming health insurance exchanges to supplement private insurance plans for low-income citizens.

“From a financial perspective, what the secretary re-confirmed was that the feds were going to pay 100% of the costs for the Medicaid expansion and then – it was new information – it was up to the state completely on what mechanism we chose as a delivery vehicle,” said Thompson. “So the health insurance exchange is where we got the private sector option to use the 100% federal funds to essentially buy people into a private company-run health insurance product as opposed to expand our state-run Medicaid program.”

WHAT TO CALL IT
When asked, Thompson said the concept may not be accurately called Medicaid expansion. It is really a funding shift from Medicaid to the health insurance exchanges prescribed by the Affordable Care Act.

“I think we’ll have to see where the House and the Senate end up,” he said. “I think it is not ‘expanding Medicaid’ in the traditional sense. It is using federal funds through Medicaid to buy people into the private delivery system.”

In separate conversations, a State Senator and a medical professional both referred to it as “Medicaid contraction.”

Thompson also noted that the new flexibility might lead to a review of what type of health insurance exchange the state will conduct. Last session, lawmakers – led by Republican opposition – shot down plans for a state-run health insurance exchange.

Gov. Beebe and health insurance officials settled on a state-federal partnership for the exchange, but discussion of a federal-run exchange has been openly discussed.

Thompson said that there is a 3.5% insurance premium tax to be levied on plans in the federal-only and state-federal partnership exchanges. The money will be used to cover federal costs associated with the exchanges, he said.

With a state-run exchange, Arkansas may be able to avoid the 3.5% insurance premium tax being levied.

“We might be able to protect some of our citizens from some of that federal tax if we are doing a state-only exchange,” said Thompson.

POLITICAL BENEFITS
Thompson said there are some political benefits to taking advantage of this new flexibility option, which was received favorably by Democratic and Republican lawmakers.

Some of the political benefits include:

  • Not growing people on a “welfare card” through Medicaid
  • Using the private sector and its efficiencies to deliver care
  • A consumer experience similar for different income levels
  • The feds still pay 100% of the costs for first 3 years
  • Providers could be reimbursed at a higher rate than a Medicaid reduced rate

Thompson says another advantage to having the Medicaid additions in health insurance exchanges is that it will cut down on “churn,” which happens when a Medicaid recipient moves off of Medicaid to a private insurance plan and vice-versa.

“They can stay on the same plan going up and down the income elevator and not have to switch,” he said.

Thompson said a variety of legislative opinions of other features of the Medicaid-health insurance exchange hybrid include subsides and co-pays. Some lawmakers have discussed means testing and drug testing.

As an example, Thompson said co-pays may be used to discourage emergency room trips, but not applied to preventive health care, such as immunizations, mammograms or annual check-ups.

“I think all of those lead us to a much newer approach to how we have traditionally dealt with Medicaid,” he said.

LIFE SAVING AND ECONOMY SAVING
Thompson, who also heads the Arkansas Center for Health Improvement, rolled out a new collection of economic and health care statistics from 2012.

Last year, 14% of Arkansans in rural counties had no health insurance during hospitalization stays. The Medicaid expansion concept would improve that statistic, meaning more money for private hospitals and medical clinics.

Thompson estimates these changes and improvements in financing could lead to 2,300 lives saved across the state.

“Because the insurance will flow to the rural parts of the state, most of the money is going to flow to the rural parts of our state. Some of our counties will have the potential to get an additional $300-$400 per person per county each year if we do the expansion and optimize the health insurance exchange,” he said.

You can watch his full interview in the video below.

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