Gov. Hutchinson Changes Private Option Proposals Based on Stephen Group Report 

Gov. Asa Hutchinson (R) has rethought two of his seven proposed changes to the Medicaid private option, proposed renaming it “Arkansas Works,” and supports a managed care system for high-cost Medicaid populations after reviewing a report by a health care consultant hired by state legislators.

In a letter written to members of the Health Reform Legislative Task Force Oct. 27, Hutchinson said he no longer supports limiting access to private market coverage to working individuals, while the unemployed are enrolled in traditional Medicaid. He also no longer wants to eliminate payments for non-emergency transportation expenses.

Hutchinson proposed both ideas Aug. 19 in a speech before the task force, which was formed this year to consider changes to the private option and overall Medicaid as a compromise that funded the private option through 2016. The private option provides private health insurance for individuals making 138% of the federal poverty line using federal Medicaid funds. Opponents say it is unsustainable and an unacceptable expansion of Obamacare.

The task force is required by law to submit its proposals by the end of the year. The Stephen Group provided a report to the task force in October treating those two proposals unfavorably. Hutchinson wrote that the provision enrolling the unemployed in Medicaid would be difficult to administer with an uncertain impact on premiums. He noted that he had received negative feedback in conversations with legislators and health care providers regarding the transportation provision, which could result in reduced access and potentially higher costs.

The Stephen Group report said Arkansas’ Medicaid system could save $2.4 billion by 2021 using a managed care model where private companies would administer the system with oversight by the Department of Human Services. Hutchinson wrote that he supports managed care, “but only for limited and targeted populations” – specifically, high-cost populations.

Hutchinson wrote that the program must promote employer-sponsored insurance among able-bodied adults. Market-based reforms will require a waiver from the federal Centers for Medicare and Medicaid Services. He hopes to request a broad, global waiver with the Obama administration and, if not granted, push for more flexibility with the next presidential administration, when the “political climate may change and be more receptive to further reforms of our Medicaid system,” he wrote.

However, the state is running up against a deadline. It must advise CMS of its intention to end the private option waiver and request one for “Arkansas Works” by the end of this year.

Hutchinson noted that The Stephen Group reacted favorably to five of his recommendations. Following are the five.
• Requiring those eligible for the private option to participate in employer-sponsored insurance when available, while the state provides assistance to help them pay their premiums that would be equal to the current coverage they receive through the private option.

• Requiring private option recipients with incomes of more than 100% above the federal poverty level to pay premiums up to 2% of household incomes.

• Implementing work training referrals for unemployed and underemployed private option recipients.

• Creating cost savings through reforms such as reducing reimbursements, implementing managed care organizations, and/or expanding the state’s payment improvement initiative.

• Strengthening program integrity.

The Stephen Group report found that nearly 43,000 Medicaid and private option recipients have best addresses that are out of state. DHS has been redetermining eligibility for Medicaid, a process that occurs once a year.

“While there may be various scenarios that explain an out of state address, it seems apparent to me that the reason thousands failed to respond to the request for income information and were subsequently stricken from the Medicaid roles is that they were in fact not eligible. Such a finding convinces me that our verification process must be continuous, rather than one that is undertaken months or years after a change in status,” he wrote.

The Stephen Group recommended Arkansas create a verification entity within the Department of Finance and Administration or another agency. Hutchinson said he is reviewing the idea, but “I generally think this is a more effective means of strengthening the program integrity than the current department-based process.”

Hutchinson said the report “offered a number of excellent ideas to enhance the overall objectives of reducing costs while expanding health care access.” Those would include the report’s “best in the SEC” initiative encouraging healthy living, which he said would coincide with his own recently announced “Healthy Active Arkansas” plan. He asked the task force to include initiatives that would encourage healthy living in its recommendations.