Legislators support Gov. Hutchinson negotiating Medicaid expansion changes with feds

Legislators gave Gov. Asa Hutchinson (R) the green light to continue negotiations with the federal government for a waiver that would change and perhaps continue the private option in another form he is calling “Arkansas Works.”

Hutchinson asked legislators to approve the framework for Arkansas Works that he will take to U.S. Secretary of Health and Human Services Sylvia Burwell starting in January. The state must receive a waiver from Burwell’s department to enact those reforms.

The legislators who are members of the Health Reform Legislative Task Force have been considering changes to the state’s Medicaid and private option programs and are required to issue their first report by the end of the month.

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.

Hutchinson said he needed legislative support to pursue those reforms, and the future of the Medicaid expansion will depend on what waivers Burwell approves. He asked for a unified recommendation, and no legislators voted no in a voice vote.

However, not all legislators voted yes. Sen. Cecile Bledsoe, R-Rogers, who has voted against the private option in the past, abstained. She told reporters afterward that legislators were voting merely to give Hutchinson the authority to pursue negotiations and said she remained doubtful that a Medicaid expansion such as Arkansas Works can be sustained. She said Congress has already voted to cut Medicaid expansion and expressed doubt that the next presidential administration will continue to pay for 90% of the costs, saying it could be as low as 50%.

Hutchinson said staff members will meet with DHHS officials in January while he will meet with Burwell. A detailed plan will be formed in January and April, followed by action by the task force and then a special session of the Arkansas Legislature.

The motion also supported Hutchinson’s contention that the state must save $835 million in Medicaid costs over five years. That amount would equal $167 million a year, the state’s share being $50 million-$60 million. That would cover the state’s 10% share of the private option. He said the state potentially could save $843 million over those five years through a collection of reforms. He said $250 million could be saved with changes to long-term care, $20 million could be saved in the Medicaid dental program, $110 million could be saved in pharmacy benefits, $231 million could be saved in behavioral health, and $232 million could be saved in services for persons with developmental disabilities.

“My bottom line is, we have to achieve the savings. … Any path to get to those savings has to be credible, has to be measurable, and has to be independently affirmed,” he said.

In addition to the $835 million in savings, Hutchinson said that the Medicaid expansion must reinforce Arkansas values. Those would include encouraging employer-based insurance, encouraging personal responsibility, and ensuring program integrity.

Specifically, the waivers Hutchinson will seek will include a requirement that beneficiaries enroll in employer-based insurance where available rather than staying on Arkansas Works, with the state sharing in the costs and the premiums. Moving those recipients to employer-based health insurance could save $29 million per year. He said recipients should be referred to work training and should be responsible for paying part of the premium. Recipients with low incomes but substantial assets also could be responsible for part of the costs. He said he would like to eliminate the ability of new recipients to be covered for 90 days prior to their enrollment. Instead, coverage would begin the day they enroll. Also, the state needs a path to exit the program if the federal government changes the 90-10 match rate.

“What we’re trying to do is get the best service for the customer at the best price for the taxpayer,” he said.

In response to questions from Rep. Vivian Flowers, D-Pine Bluff, Hutchinson said waivers have been granted in other states for the employer-based insurance, for the work referral, and for recipients with incomes above 100% of the federal poverty level being responsible for part of their insurance premiums. He did not expect the asset test to be approved.

Hutchinson backed away from an earlier proposal of his that would temporarily lock out from the program recipients who do not pay their premiums. Afterward, he told reporters, “Accountability is the key, and I’ve always said incentives are better than punitive measures, and you don’t want as I said today to increase uncompensated care, so I’ve indicated to legislators that expressed some concern about that that we’ll work through what is the right accountability for those type of premium requirements.”

Finding the $835 million in savings could include the state adopting a managed care model, or instead it could expand its patient-centered medical home model. Under managed care, the state would contract with a private company to manage part of the Medicaid program and be responsible for covering costs if they are higher than expected. Under the patient-centered medical home concept, a primary care physician coordinates care to promote effectiveness and efficiency.

Legislators are divided as to their preference for those two models. They voted to ask its consultant, The Stephen Group, to look for at least $835 million in savings over five years using the state’s current patient-centered medical home concept, except in the area of dental care, which most agree should use the managed care model.