Hutchinson: ‘Arkansas Works’ should encourage work as part of ‘Private Option’ change

Gov. Asa Hutchinson’s proposed replacement for the private option, “Arkansas Works,” should encourage employer-based insurance, incentivize work, and ensure program integrity through a variety of means, including potentially an asset test for recipients, Hutchinson said Tuesday.

Speaking to the Arkansas Medicaid Educational Conference, Hutchinson (R) made it clear the private option will not continue in its current form, saying, “Please understand very carefully that on Dec. 31, 2016, the private option ends. The private option ends.”

The private option is a state program that uses federal Medicaid dollars to purchase private health insurance for Arkansans with incomes up to 138% of the federal poverty level. It was created in 2013 as a result of a waiver from the federal government at a time when some states were simply expanding Medicaid while others were rejecting the expansion outright. It has provided health insurance for about 250,000 Arkansans and helped the state reduce its uninsured population at higher rates than any other.

But it has been controversial from the beginning. It barely achieved the three-fourths majority it needed to pass in 2013 and barely was reauthorized in 2014. Some Republicans oppose the program because Arkansas will begin paying part of the bill starting in 2017, with that percentage eventually reaching 10%. Opponents also oppose it because they say it is an expansion of Obamacare and increases the national debt.

Hutchinson and legislative leaders brokered a compromise during this year’s legislative session that funded the private option through 2016 while a legislative task force reforms the system. He has since proposed the Arkansas Works model. The task force meets Dec. 15-17 and is expected to issue its recommendations soon afterwards that likely will form the basis for a special session in 2016.

Hutchinson said the “Arkansas Works” name “really illustrates what we’re trying to achieve – not a permanent state of dependency on government-provided insurance, but a help during a difficult time as people strive to move up the economic ladder.”

He said the Arkansas Works model will encourage employer-based insurance by requiring recipients to take advantage of that benefit where it is offered, with the state picking up the difference to pay for premiums and copayments. Current private option recipients have little financial responsibilities in the program, leading some to reject insurance offered by their employers in order to remain on the private option. 

Hutchinson said that the federal Centers for Medicare and Medicaid Services in the past has not granted waivers allowing states to require Medicaid recipients to work. However, Arkansas Works should require beneficiaries to seek work training.

“I’ve always said that our social programs should be an incentive for people to work, not an incentive for people to quit working,” he said to applause.

The program also will emphasize personal responsibility by requiring recipients with incomes above 100% of the federal poverty level to pay part of the premium costs, with other waivers perhaps requiring those with smaller incomes to contribute a share as well. Like Indiana, Hutchinson said Arkansas Works should include a “lockout” provision where beneficiaries who don’t pay their bills would lose their benefits and not be able to re-enter the program for a period of time. Meanwhile, he proposed eliminating the program’s 90-day retroactive eligibility provision, which pays the unpaid bills for new beneficiaries for the previous three months’ care when they enroll.

“Everybody needs to have some incentive, an investment in their own health care,” he said.

Hutchinson said he supported an asset test for Medicaid beneficiaries, citing the case of an insurance agent who told him someone had applied for the private option with a $200,000 home and a similar bank account. He did not know know if CMS would approve that provision.

“I do believe asset testing should be a part of the program integrity of the Medicaid expansion,” he said.

And like the Temporary Assistance for Needy Families welfare program, there perhaps should be a lifetime cap on benefits, Hutchinson said.

Hutchinson said the state needs to find $160 million to $170 million annually in Medicaid savings to save $50-$70 million in the state’s share. Those savings could come from a combination of health care reforms previously enacted by the state along with the use of a private administrator for certain populations – an arrangement known as “managed care,” which is also controversial. 

“We have to have the savings if we’re going to do what I believe is our responsibility, and that is to cover that expanded population,” he said.

He said the state needs an exit strategy so it can respond if the federal government changes the equation so that Arkansas would be responsible for more than 10% of the program’s costs.

Hutchinson afterward told reporters he has told U.S. Secretary of Health and Human Services Sylvia Burwell that he wants to meet with her in January. He said he has briefed her on his proposals for Arkansas Works.