OKLAHOMA didn't expand Medicaid under Obamacare, but Arkansas officials did — with a twist. Arkansas got permission from Washington to use expansion funds to help new enrollees buy private insurance through Obamacare exchanges.
Supporters argued the system would hold down costs through market forces. Some Oklahoma lawmakers have called for duplicating it here. But a new report shows the Arkansas plan falls short of its boosters' claims.
In “The Empty Promises of Arkansas' Medicaid Private Option,” Jonathan Ingram, director of research for the Foundation for Government Accountability, said supporters believed the plan would encourage greater personal responsibility through cost-sharing requirements. Instead, Ingram notes that under Arkansas' agreement with the federal government, “Private Option enrollees will pay no part of their premiums.”
Although the insurance plans purchased do have deductibles, “the Medicaid program pays those deductible as wraparound coverage,” while individual co-pays “must comply with federal cost-sharing requirements for all Medicaid patients.” Under federal guidelines, those co-pays can be as little as a few dollars — not enough to deter overconsumption of medical resources by recipients who consider them essentially free.
Federal caps on total cost-sharing are so stringent the Urban Institute estimated “roughly 77 percent of the Private Option enrollees will have absolutely no cost-sharing,” Ingram notes. As a result, he says “enrollees will have no incentive to choose lower-cost options” when selecting an insurance plan on an Obamacare exchange, “particularly given the fact that many plans reduce provider networks in order to bring premiums down.”
The Arkansas plan also assumed the expansion population would be relatively healthy, but Ingram notes that group actually has a much higher rate of self-reported health problems. (Similarly, research in Oklahoma found potential Medicaid expansion enrollees had higher rates of smoking, heavy drinking, obesity, serious mental illness, serious psychological distress and substance use disorders than the current Medicaid population.)
While often portrayed as hardworking but low-income Arkansas adults, Ingram writes that “the U.S. Department of Justice estimates that more than 35 percent of these new potential Medicaid enrollees have previous involvement in the criminal justice system, having spent time in jail or prison.” In addition, nearly half of potential Arkansas Private Option enrollees “do not work at all.”
In short, actual hardworking families who live on a budget are paying taxes so that some able-bodied but not gainfully employed ex-convicts can enjoy virtually free health care.
One positive outcome of the Arkansas plan is that health care providers received higher rates than under traditional Medicaid. That's one reason some Oklahoma doctors and hospitals support duplicating the Arkansas model. But this also makes the program more expensive for taxpayers. Although the state's share of expansion costs will supposedly never exceed 10 percent (a debatable long-term proposition), that could still translate into a substantial financial drain, diverting state funds from schools, roads and public safety.
Due to federal red tape, the Arkansas plan provides few meaningful cost controls while extending virtually “free” health care to a group that includes many not-terribly sympathetic individuals. At the same time, simply maintaining Oklahoma's current Medicaid program this year will require a $144 million budget increase. Otherwise, provider rates may be cut.
The Arkansas plan is an interesting experiment, but appears fatally flawed. Oklahoma lawmakers' time would be better spent addressing the challenges of the state's current Medicaid program than trying to expand it.