Arkansas legislators issue health report, ‘cage fight’ looms next year

One day after giving the go-ahead to Gov. Asa Hutchinson (R) to seek federal waivers for his Arkansas Works replacement for the private option, the Health Reform Legislative Task Force recommended in its statutorily required report that at least $835 million in savings be found over five years as requested by Hutchinson.

The task force was formed by legislation this year to resolve disagreements over the private option, the program created in 2013 that uses federal Medicaid dollars through the Affordable Care Act to purchase private health insurance for Arkansans with incomes between 17-138% of the federal poverty level. The program has helped reduce the number of uninsured Arkansans, but critics say it is a costly expansion of Obamacare that the state will not be able to afford when it starts picking up part of the cost in 2017. By 2020, Arkansas will be responsible for 10% of the cost.

The task force was required by law to submit a report by the end of the year. The report summarized the past year’s findings and reiterated the task force’s support for Gov. Hutchinson seeking waivers from the federal government to change the private option to Arkansas Works, a similar program emphasizing more personal responsibility on the part of beneficiaries. The report reflects a desire by Hutchinson to find $835 million in real dollars in Medicaid cuts over five years to pay for Arkansas’ coming 10% share of the program. Legislators who support his seeking the waiver do not necessarily support Arkansas Works, however.

After the Thursday (Dec. 17) meeting, the committee’s chair, Sen. Jim Hendren, R-Sulphur Springs, said there’s no deadline for finding the $835 million, but he hopes it happens by the end of next year. He said the Bureau of Legislative Research may be able to bring draft legislation to legislators “as we start approaching February and March.” He said he hopes to be able to provide a framework for those spending cuts before the Legislature meets in special session next year to consider Arkansas Works. But he said he will “be shocked” if the task force has agreed on exactly how it will save the $835 million.

“And that may make it more politically difficult to sell the Medicaid expansion to some who say, ‘I want to see the savings before I’ll vote for any expansion program,’” he said.

The task force voted Wednesday morning to endorse Hutchinson’s efforts to obtain a waiver and asked its consultant, The Stephen Group, to study how the state could save $835 million without using a managed care model.

Legislators are divided on whether to use that model, where a private company would be paid to manage part of Medicaid and bear the risks if costs exceed expectations, or instead to seek an expansion of the state’s patient-centered medical home concept. That’s where a primary care physician coordinates care to improve efficiency and effectiveness. And of course, legislators still must decide whether to support Arkansas Works, or some other continuation of the private option, or scrap the idea entirely.

According to Hendren, those decisions will come. Just not yet.

“There’s going to be tremendous battle, but having that battle before we even establish what our goals are was out of sequence, so I think the task force realized that, right now, we can’t afford to sit here and keep treading water if we want to have any hope of progress,” he said.

He pointed out that the task force agreed in a bipartisan way to cut an entitlement program. However, he said, “That is the beginning of what we know is going to be a bloody fight. … Everybody’s waiting for the cage fight. It’s coming. But we’re not there yet.”

The report summarized the task force’s findings this year. The private option has helped the rate of uninsured Arkansans fall from 27.5% to 15.6% from 2013 to 2014, with hospitals eporting a substantial reduction in uncompensated care visits. Ending the private option would cost the state budget $438 million from 2017-21. Forty percent of private option recipients report no income. Private option recipients are using emergency rooms at higher rates than traditional Medicaid recipients, apparently because of a lack of experience in using the system.

Meanwhile, Arkansas is paying higher costs for traditional Medicaid than other states. Costs are projected to grow 5% a year over the next five years, with state general revenue funding needing to grow $500 million to meet those increases if nothing is done. Seventy-four percent of the costs are for aged, blind and disabled recipients who fall outside Arkansas’ cost-saving reforms.

Finally, Arkansans’ health is poor compared to other states, and not enough emphasis is placed on generating a return on investment on health care dollars. Problems exist with the state’s ability to track re-enrollment eligibility. According to findings during the task force process, too many Arkansas Department of Human Services operations suffer from a lack of integration and coordination, and the agency uses too many consultants and has too few professionals with the skills needed to manage programs.