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Medicaid expansion: Arkansas plan signals big policy shift

March 20, 2013
by Dennis Grantham, Editor-in-Chief
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Using Medicaid dollars to buy private insurance plans might be good for consumers, but will it be good for behavioral health providers?

The Medicaid Expansion under the Affordable Care Act has, up to now, always been an up or down proposition for the states. States who agree to it get 100% of the costs of the expansion covered with federal dollars through 2016 and 90% thereafter.  It’s a generous deal, to be sure.

Among governors and states who stand opposed to the expansion, 14 at last count, the primary sticking points have centered on the nature of the Medicaid program itself, namely, that expanding Medicaid would require expanding what many see as the cost, influence, rules and regulations of a with a large federal program.  Many governors have asked for flexibility, for managed care waivers, or for other program changes before making this major, up or down recommendation to their states.

But no governor went as far as Arkansas’ Mike Beebe, a Democrat in a state house full of Republicans. Yesterday, in a webcast with the Whole Health Coalition, Cindy Mann, Director of the Center for Medicaid and CHIP Services (CMCS) within the Centers for Medicare & Medicaid Services (CMS), indicated that the Department of Health and Human Services “is dotting the i’s and crossing the t’s” in apparent agreement with Beebe’s very un-bureaucratic proposal for Medicaid Expansion.  

News of this “Medicaid game-changer” was first reported by the Arkansas Times in late February, following a meeting between Gov. Beebe and HHS Secretary Kathleen Sebelius in which the Secretary reportedly told Beebe to “go for it” on the innovative plan, with a final approval expected after detailed—and ongoing—efforts to document the plan were completed by representatives of CMS and the Arkansas’ Department of Health Services.

Arkansas’ plan envisions an expansion that uses available federal funding—the Medicaid expansion funding provided in the Affordable Care Act — to finance the purchase of private health insurance plans for some 225,000 Arkansans who would qualify for the Medicaid expansion. The authority of the states to use these funds for purchasing private insurance — a criticism leveled at the plan earlier this month — apparently comes from the Social Security Act (Sec. 1905(a), which allows states to offer “premium assistance” explains a recent Washington Post blog.

Assuming eventual completion and approval of the detailed plan, this would mark the first time, the health plans that the ACA refers to as “Medicaid alternative benefit plans,” (in plainer terms, the state-approved health plans for those to be covered in the Medicaid expansion) would not be administered through a state’s Medicaid office or be the product of a federal Medicaid waiver.

Under Arkansas’ proposal, these plans will be the products of private insurers, bound by the same essential health benefit and parity requirements as other policies. More significant, these policies will be shopped for and purchased on the same state-based “affordable insurance exchange” where other Arkansans who do not receive employer-sponsored insurance will go to buy their health insurance coverage.  And, they’ll be paid for with federal Medicaid funds administered by the state.

"An even larger carrot for the states . . ."

Though it’s not a done deal yet, “my conclusion is that HHS is going ahead with the Arkansas model,” commented Ron Manderscheid, a co-chair of the Whole Health Coalition and executive director of the National Association of County Behavioral Health and Developmental Disabilities Directors (NACBHDD).

“This puts an even larger carrot in front of the noses of the states, in that it now appears that qualified health plans, within the mechanism of the state affordable insurance exchanges, could be the mechanism for doing the Medicaid expansion,” said Manderscheid.  “Based on what I heard in Cindy Mann’s remarks, I believe that they [HHS] are going to accept this as an alternative way to do the Medicaid expansion.  If they do, that means the 100% money [the 100% federal match through yearend 2016] will roll into the states, into these qualified insurance plans. And, the insurance companies are going to like that.” 

Behavioral health providers "concerned"

So too, presumably, would conservatives like those in Arkansas who argue against the expansion of federal programs like Medicaid.  Tom  Petrizzo, CEO of Ozark Guidance (Springdale, Ark.) who now serves as president of the board of the Mental Health Council of Arkansas, explains that the HHS move was seen by one Arkansas state legislator as a “tectonic shift” that “broadened the discussion from ‘no’ to ‘this is a possibility.’”

Petrizzo explained that a decision to go ahead with the expansion would add one in 12 Arkansans—about 225,000—to the state’s Medicaid rolls, with the result that about one in three Arkansans—roughly one million—would be on Medicaid.  This week, a study by Manatt Phelps & Philip, LLP comparing the cost difference between expanding via private insurance instead of traditional Medicaid found that the costs would likely be similar, with a worst-case difference of 14% for private insurance.

While Petrizzo says that “there’s no doubt that the expansion is a good deal for the state’s uninsured consumers,” the jury is still out as to its impact on the state’s behavioral health provider organizations. “There are a number of variables that we’re concerned about,” he said, ticking off a series of issues:

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