Arkansas House firmly rejects $8.1 billion DHS Medicaid budget following federal ruling

The Arkansas House of Representatives on Friday (March 29) soundly rejected the $8.1 billion budget for the state’s Medicaid expansion program and other Department of Human Services priorities only two days after a federal judge struck down a work requirement for low-income participants adopted by lawmakers in the 2017 session.

The rejection of Senate Bill 99 came after Rep. Lane Jean, R-Magnolia, co-chair of the Joint Budget Committee, answered a volley of questions on the House floor from lawmakers concerned that the state may have to cut services or run into future budget problems because of the adverse federal court ruling by U.S. District Judge James Boasberg on Wednesday.

Jean told lawmakers that health care costs since Arkansas Works expansion was approved by the legislature in 2017 have continued to spiral out of control. In fiscal 2017, the Republican House leader said the state-funded Medicaid at a cost of $41 million. That cost went up to $106 million in fiscal 2018, and by another $135 million so far in fiscal 2019, which ends on June 30, 2019.

“Truth of the matter is that healthcare has continued to go up and up and up,” Jean appealed to his fellow legislators. “I don’t care if you are Republican or Democrat, you’ve got to be concerned with costs.”

Jean said the Arkansas Works portion of the $8.1 billion DHS budget would cost the state about $1.3 billion. He said even if the federal government’s appeal of Wednesday’s ruling fails, state fiscal officials had sufficiently budgeted enough to cover the estimated extra $20 million expense it would take to pay to provide health coverage to the thousands of Arkansans that were pushed off the program.

“They do have the money in the DHS budget to pay for this,” said Jean.

After Jean asked his fellow representatives to support SB 99, several fellow Republican legislators asked the Magnolia budget hawk to pull the appropriations bill down or separate items related to traditional Medicaid programs for children, the elderly and disabled.

Before the bill failed by a 52-28 vote with 11 lawmakers voting present, Rep. Grant Hodges, R-Rogers, came down to the House podium to speak against the proposal. Hodges said he went back two years ago to research when the Arkansas Works expansion was approved as the state was awaiting the work requirement waiver, citing comments made by Gov. Asa Hutchinson to rally support for the legislation.

Hodges questioned why the Arkansas Senate rushed to approve SB 99 by a vote of 27-4 only minutes before the federal decision, noting that all state appropriations require a 75% vote. He then asked his fellow lawmakers to table the measure so all 100 members could further study the impact of the federal ruling if the Trump administration does not win an appeal.

“Can we at least wait to pass this appropriation until after if we know it will be appealed? If it is appealed, how long is that going to take to resolve? Is it going to take years; is it going to go to the Supreme Court? What happens to Medicaid between now and then?” Hodges asked rhetorically.

“I think the House deserves to have our questions answered and given ample time to consider the ramifications of the court’s decision on the path forward, and to be included as a co-equal on these decisions, rather than being run over with an $8 billion decision in less than 48 hours,” Hodges concluded.

On Wednesday, U.S. Judge Boasberg ruled that U.S. Department of Health and Human Services’ decision to grant Arkansas the work requirement waiver was “arbitrary and capricious because it did not address – despite receiving substantial comments on the matter – whether and how the project would implicate the ‘core’ objective of Medicaid: the provision of medical coverage to the needy.”

Arkansas was the first state to implement a work requirement waiver, but Boasberg said it could not stand here. Likewise, the Washington, D.C.-based federal judge relied on an earlier ruling against Kentucky’s work requirement he had made in June 2018.

On Thursday, Gov. Hutchinson told reporters he is asking HHS Secretary Alex Azar along with the Department of Justice to seek an expedited appeal of the judge’s decision nullifying the Arkansas Works work requirement. Hutchinson said that giving up on the program would mean giving up the opportunity to lead nationally.

“I expect this to move quickly,” Hutchinson said of his meeting with HHS officials. “I was very encouraged by it, and that they want to take an aggressive approach on it.”

As a result of the federal ruling, state Department of Human Services officials have shut down a link to the state’s online reporting portal and put a notice on the website. The state has also removed a provision in the work requirement waiver received a year ago from the Trump administration moving retroactive coverage for new enrollees to 30 days prior to enrollment. That date will now move back to the original 90 days.

Hutchinson said he remains committed to Arkansas Works and the work requirement, adding the judge did not strike down the work requirement based on its reporting requirements.

“He had a fundamental disagreement with the work requirement in and of itself. His view is that Medicaid is an entitlement program, and you cannot place additional requirements that may lead to a loss of coverage.” He said the judge recognized that his own ruling could be a “pause.”

In 2018, 18,164 enrollees lost coverage for failing to meet the Arkansas Works work requirement. Of those, 1,452 recipients gained coverage in 2019, including 1,441 of them in Arkansas Works. More than 13,000 recipients of the state’s Arkansas Works program did not meet its work requirement in February. A total of 6,472 have not met it for two months this year and faced losing their coverage if they did not comply in March.

Hutchinson said when the program was created in 2013, an estimated 250,000 were expected to be covered. Instead, the number reached 330,000 but has since fallen to 235,000. He said that meant 95,000 have moved off Arkansas Works but only 18,000 had lost coverage because they had not complied with the requirement, and of those less than 2,000 had re-enrolled this year.

DHS Director Cindy Gillespie will discuss Arkansas Works’ future on this Sunday’s edition of Talk Business & Politics.

UPDATE
After the disappointing defeat, House Speaker Matthew Shepherd, R-El Dorado, told reporters he was still optimistic SB 99 would be approved before the end of the session, even if it is brought up again several times. He said he expects to bring the DHS budget proposal back to the chamber by Tuesday after House members have had time to think about it and get any questions answered over the weekend and early next week.

“We have been through these kinds of debates before,” Shepherd said. “I am optimistic that we can make the case. And with more time, that’s something that is beneficial at this point.”

Like Senate President Jim Hendren, who said a policy debate on Arkansas Works should not take place on budget appropriation bills, Shepherd similarly suggested that House lawmakers should move forward and approve the state’s budget. He said waiting to hear back from the Trump administration on if or when it plans to appeal on the federal ruling is out of the legislature’s control.

“In my view, we should do everything we can to carry out and go ahead and fund the appropriations, and that further makes the case for the need for the expedited appeal if we’ve done our part in terms of appropriating the funds for the [Arkansas Works] program,” Shepherd said, adding that “we would not back voting on each line item separately in the DHS Medicaid budget.”

The governor said some House members still have questions regarding Wednesday’s work requirement ruling, which is to be expected.

“I expect a second vote next week, and I trust the bill will pass,” Hutchinson said.

Shepherd said he was still confident the 92^nd General Assembly could complete its work by April 12, a sentiment echoed by Hendren. Besides approving the appropriations for Gov. Hutchinson’s $5.75 billion biennial budget, the House Speaker said the other key measures he would like to see approved by the House by April 12 is the term limits proposal and an internet tax and marketplace fairness bill.

Earlier Friday, the House Revenue and Tax Committee gave a do-pass recommendation for Senate Joint Resolution 15, which would alter the time lawmakers elected on or after Jan. 1, 2021, can serve 12 years in the House or Senate with the ability to return after a four-year break.

Senate Bill 576 by Sen. Bart Hester, R-Cave Springs, which would require a remote or out-of-state online retailer to collect sales tax from purchases made by Arkansas tax code, was blocked by a House committee on Thursday. That bill would phase in the marginal tax cut rate approved earlier in the session and levy a tax on car wash operators, among other things.