Gov. Hutchinson: Senate healthcare bill would cause ‘$500 million hit’ to Arkansas economy

Gov. Asa Hutchinson said Thursday (June 29)  the U.S. Senate healthcare bill as drafted could lead to a “$500 million hit” to the Arkansas economy and could end the popular Arkansas Works program.

While acknowledging  the Affordable Care Act was not a “safe path” or sustainable for Arkansas or the nation, Hutchinson wavered on his support for the Senate bill to replace the federal healthcare law also known as Obamacare. He also identified positive features of the Senate bill, including deficit cuts, reduction in federal costs and more regulatory flexibility to states.

“These are all good things. These are things that we have advocated and are delighted that are included in the current version. But, the big problem is that the Senate bill does continue to shift costs to the state, and that leaves states like Arkansas with few choices,” he said.

Hutchinson continued: “In Arkansas, my predecessor and the General Assembly expanded coverage based upon a commitment from the federal government to fund the program at a certain percentage. The Senate bill reduces that financial commitment, which leaves the state on the hook for the difference.”

Hutchinson made the comments during a press availability at the Governor’s Conference Room at the State Capitol. The governor’s 30-minute healthcare talk came two days after Senate Majority Leader Mitch McConnell, R-Ky., postponed a vote on a Senate GOP version to partially “repeal and replace” the Affordable Care Act after it became obvious that too many Republican senators were opposed to the measure.

McConnell is said to be working on a revised version of the plan a day after GOP senators met with President Donald Trump on Tuesday. According to media reports, a potential replacement version of the bill could still come this week as senators head for their Fourth of July recess.

To date, U.S. Sens. John Boozman and Tom Cotton, Arkansas’ Republicans representatives in the U.S. Senate, have refrained from making public comments about the legislation being developed or the changes where they and other members have expressed concern. Talk Business & Politics reached out to each Senator for comment after Hutchinson’s Thursday morning remarks.

“Senator Boozman values Governor Hutchinson’s input. We have an open line of communication with the Governor. He has presented us with his concerns and Senator Boozman and Cotton been discussing those with Senate leadership. Senator Boozman and his colleagues are continuing to meet this week to try to overcome their differences and revise the plan. There are lots of moving parts at the moment, so he doesn’t want to get ahead of the discussions, but he hopes though that these yield a revised version that can be sent to CBO by the end of the week,” noted a statement from Boozman spokesman Patrick Creamer.

“Senator Cotton has communicated with Governor Hutchinson throughout this process and as the debate unfolds that dialogue will continue. He’s aware of the governor’s concerns and has worked with Senator Boozman to share them with Senate leadership,” noted the statement from Cotton’s office.

LIMITED OPTIONS
Hutchinson said he has spoken on several occasions in the past few weeks with Boozman and Cotton, relaying his concern that the Senate should “listen to the governors” from across the U.S. and suggesting more substantive changes that do not shift federal Medicaid costs to states.

“People ask me: ‘Do you support the Senate bill or do you not support (it)?’ That is really not a fair question because it is changing day by day,” Hutchinson said. “And we all know there will be more substantial changes made in the coming weeks before the final vote is taken.”

In elaborating on his concerns with the Senate’s Better Care Reconciliation Act, Hutchinson said if Congress reduces the reimbursement rate for Medicaid, then states must either reduce the expanded coverage known as Arkansas Works, cut costs in traditional Medicaid or raise taxes.

Looking at state lawmakers in attendance at the press conference, Hutchinson replied: “We are not raising taxes, so our only option would be to reduce Medicaid coverage. The state of Arkansas could not absorb that additional investment that would be required to maintain the coverage for 300,000 Arkansans. And so, we would have to make dramatic changes based upon that reduced federal participation.”

GOV. HUTCHINSON’S SUGGESTED CHANGES
After laying out his concerns and praising Arkansas Works as a national model for healthcare, Hutchinson recommended several changes to the Senate bill.

First, Hutchinson said, the aged, blind and disabled populations in traditional Medicaid would be shifted to a per capita cap to ultimately reduce the financial commitment to the states under the Senate bill. He said this category needs to be exempted from the per capita option because it is a high expense category and represents a cost shift to Arkansas.

Secondly, Hutchinson said the Senate bill should extend the block grant option to allow states to include the expansion population. This is not allowed under the draft Senate bill. If the block grant option is extended, he said, states can assume risk, create savings, and assure continued coverage for the working poor.

The Senate should redo tax-credit subsidies to stabilize the individual market and make healthcare coverage affordable for low-income individuals, Hutchinson said. The draft legislation creates “winners” and “losers” in the same way as Obamacare, which increased premiums and cost sharing for the elderly and provided few options for those in lower income brackets, he said.

“They have to have an incentive to move off of Medicaid,” Hutchinson said. “There has to be an affordable option for healthcare coverage.”

Lastly, Hutchinson said the Senate bill should give states greater control over the Medicaid program under the per capita option. The current draft provides only minimal additional state authority, he said.

“The Senate is moving in the right direction, the status quo is not acceptable, but there has to be significant changes in the current (bill) in order to give the states like Arkansas options for the future that we can continue the coverage and not have a $500 million per year gap in our economy,” the governor said.

‘WIND-DOWN’ CONCERNS
Toward the end of the press event, Hutchinson also responded to concerns from some state lawmakers about the potential impact of the Senate bill on Arkansas Works. In legislation passed by Arkansas lawmakers in 2016, a so-called “wind-down” could be triggered by federal legislation that changes the federal medical assistance percentages, also known as FMAP.

According to Department of Human Services (DHS) officials, the wind-down provision would be triggered if the FMAP decreased from the Affordable Care Act for each year between 2017 and 2020, increasing the state’s share for funding the program from 5% to 10% during that period. In a legal opinion offered by DHS’ Office of Chief Counsel, Hutchinson said the wind-down would only be triggered after an actual reduction in federal funds occurred.

“That’s based upon legal counsel at DHS and that is my view and that would be the position of the administration,” he said. “I hope that takes a little bit of pressure off of the immediate worries because one thing the (U.S.) Senate is doing very well is giving a very long glide-path.”

Later in the day, following several questions from reporters concerning Hutchinson’s comment that the state’s economy would take a “$500 million hit” if the Senate’s Better Care Act was enacted, a staffer from the governor’s office sent this clarification:

“The Medicaid expansion program (Arkansas Works) costs approximately $1 billion annually. This money enters the Arkansas economy through providers and goods and services. If enacted, the current version of the Senate bill would reduce the federal match from 90% or 95% down to 70% (traditional Medicaid match rate). At that point, Arkansas could not cover the estimated $200 million more per year required to sustain the program. The result would be an end to the Arkansas Works program. Some people previously had their healthcare coverage through other sources, so conservatively there would be at least a reduction of spending in our economy of $500 million even before any multiplier effect. Also, at one point Gov. Hutchinson referred to the federal match rate as 67%. That number is actually 70%.”