State of the State 2024: Arkansas health care faces challenges

Editor’s note: The State of the State series provides reports twice a year on Arkansas’ key economic sectors. The series publishes stories to begin a year and stories in July/August to provide a broad mid-year update on the state’s economy. Link here for the State of the State page and previous stories.

With Arkansas’ Medicaid system still rebalancing after the COVID pandemic and Arkansans ranking near the bottom in health metrics, the state of the state’s health care is challenging.

One of the biggest health-related stories this past year has been Arkansas’ “unwinding” of its Medicaid rolls. During the COVID pandemic, the federal government provided extra money to states provided that they didn’t disenroll recipients throughout the emergency. That restriction ended April 1. While most states opted to abide by the federal Centers for Medicare and Medicaid Services’ 14-month-time frame, Arkansas law accelerated its redetermination process over a six-month period.

Now that the unwinding has ended, fewer Arkansans are enrolled in Medicaid than before the pandemic began. According to an article in Health Affairs by the Arkansas Center for Health Improvement’s (ACHI) Health Policy Director J. Craig Wilson and Dr. Joe Thompson, ACHI president and CEO, nearly one-third of the state’s population, or 923,148 Arkansans, was enrolled in Medicaid in February 2020 before the pandemic began. That number swelled by 25% by March 2023 to 1,151,347. When the unwinding period ended Oct. 1, the number had dropped to 868,059, which was 5% less than the average enrollment in 2019.

Most of those individuals were dropped from the rolls because they did not return the required paperwork. The state Department of Human Services tried to contact recipients to encourage them to reapply. It has argued that many enrollees didn’t do that because they obtained good employment and health insurance in the improving economy.

John Selig, director of the Arkansas Foundation for Medical Care, said his group under DHS contract made more than 1 million calls to Medicaid-eligible Arkansans. Even after making two or three attempts, it reached under half the target audience.

“You have to do the unwinding because the public’s support of Medicaid depends on the program’s integrity and the public and taxpayers feeling like people on the program are indeed people who are eligible,” said Selig, who was DHS director from 2005 to 2016. “On the other hand, it’s a vulnerable group. They’re often very difficult to reach because they move, they lose their phone service, they all get new phone numbers. Employment and housing are unstable.”

He believes the number of recipients will grow as more past recipients realize they have lost benefits. Thompson said in an interview that he expects the rolls to reach a steady state in the next few months.

HOSPITAL FINANCES
Thompson said hospital CEOs are saying they are seeing increased rates of uncompensated care, and the disenrollment is one of the causes. Jodianne Tritt, executive vice president of the Arkansas Hospital Association, said CEOs said at the last AHA board meeting that they were seeing increases in uncompensated care and self-pay patients. Hospitals are trying to get information to patients previously covered by Medicaid to help them reapply. Tritt said the state’s hospitals face many financial challenges with increasing supply and labor costs and inadequate reimbursements from Medicare, Medicaid, and insurance payers.

Baptist Health’s nine hospitals along with clinics and rehabilitation centers are currently out of network with UnitedHealthcare insurance plans after the health system and the insurer failed to agree on a contract. Thompson said disputes between providers and payers are becoming more visible.

“I don’t think it’s going to go away soon,” he said.

Hospitals also face labor shortages. In 2020, Arkansas was 46th in active physicians per capita, according to the Association of American Medical Colleges. During and after the COVID pandemic, hospital staffing costs increased significantly as more nurses became traveling nurses who would work only temporarily at a hospital and then move to another. Thompson said they have become less common, but they permanently reset salaries at a higher rate.

In response to the financial challenges, Tritt said hospitals are quietly cutting services, such as reducing the number of days a specialist is available. A few have converted to a rural emergency hospital licensure or are considering doing so. The designation increases federal reimbursements but doesn’t allow them to offer in-patient services. Smaller hospitals are creating transfer agreements with larger ones, but the larger ones also are struggling to maintain staffing levels.

Selig, who is on the board of directors of Saline Memorial Hospital, said some of the state’s smaller hospitals in particular are struggling because they lack the negotiating power that some of the larger systems have. They lack the ability to provide outpatient services at the same time the health care system is moving in that direction. And they struggle to find medical professionals willing to live in rural areas.

Likewise, Thompson expects more independent physicians’ offices to enter into employment or other financial arrangements with hospitals because of the financial pressures.

AFFORDABLE CARE ACT BENEFIT
Arkansas continues to benefit from its decision in 2013 to expand its Medicaid population under the Affordable Care Act. Unlike other states, it used federal dollars to purchase private health insurance for beneficiaries earning up to 138% of the federal poverty level. Originally known informally as the “private option,” it’s now known as Arkansas Health and Opportunity for Me, or ARHOME. ACHI says it has covered more than 718,500 Arkansans, or nearly a fourth the size of the state’s current population, in its 10 years of existence.

Thompson credits the program with helping individuals get services, reducing medical bankruptcies, and reducing uncompensated care. While 58 rural hospitals have closed since 2012 in surrounding states, the only two that have closed in Arkansas have been reopened or replaced. By buying private insurance, the program introduced a large purchaser in the Affordable Care Act’s Marketplace, resulting in Arkansas having the lowest individual rates in the region.

“I think the engine and the chassis are pretty solid,” Thompson said. “Each administration kind of gives it a different paint job, and we’ll have to see what this administration wants to do.”

Another bright spot in the Arkansas health care system has been the opening or scheduled opening of three medical schools. The number of medical school graduates increased from 160 in 2017 to 401 in 2023 because of the opening of the New York Institute of Technology College of Osteopathic Medicine at Arkansas State University in Jonesboro and the Arkansas College of Osteopathic Medicine in Fort Smith. Classes at the new Alice L. Walton School of Medicine in Bentonville are expected to begin in 2025.

Now the challenge is finding a place to put the graduates. A recent ACHI study found there haven’t been enough residency positions for new medical school graduates the past three years. In 2023, there were 356 residency positions for the 401 graduates. In response, lawmakers last year provided state funds for hospital residency programs.

LOW HEALTH RANKINGS
The health care system ’s challenges include the fact that it serves an unhealthy state. Arkansas ranked 48th in the most recent America’s Health Rankings report by the United Health Foundation and the American Public Health Association, which Thompson attributed to education and income challenges. It topped only Mississippi at 49 and Louisiana at 50. The state ranked 50th in food insecurity and 50th in teen births with a rate that is nearly twice the national average. It was 49th in smoking, in adults reporting frequent mental distress, and adults reporting frequent physical distress.

Moreover, many Arkansans live in underserved parts of the state. ACHI says six counties had only one full-time primary care physician in 2020, while the March of Dimes reported in 2022 that nearly half of the state’s counties lack obstetric providers or health-care facilities. The state has the nation’s highest maternal death rate and the third highest infant mortality rate. The Arkansas Department of Health reported in 2021 that Black Arkansans were twice as likely as white women to suffer from a pregnancy-related death. Arkansas also has a high rate of births delivered by caesarian section.

Thompson said there is some movement to address the issue. The University of Arkansas for Medical Sciences recently received a federal grant to provide doulas – patient advocates and navigators – for Marshallese patients in Northwest Arkansas. Walmart has expanded doula coverage for employees.

“That’s probably the one thing that I am optimistic that there is energy underneath those wings to try to make some differences while most of the other things that we’ve talked about are challenges,” he said.