Tennessee Joins Several States in Supporting Arkansas Private Option as Substitute for Medicaid Expansion
April 4, 2013 04:27 PM
On April 2, Tennessee Governor Bill Haslam (R) stated that he is currently in negotiations with the federal government regarding an alternative plan to Medicaid expansion. His plan would expand health care coverage to low income citizens with federal money by purchasing private insurance for these beneficiaries. In an address to the Tennessee legislature on March 27, the governor formally rejected Medicaid expansion, and stated that specifically, his plan would:
Expand coverage through private health insurance to those currently uninsured earning up to 138 percent of the federal poverty level
Require co-payments for those who could afford to pay them
Include an end-date of the expansion, only to be extended with the legislature’s approval
Include a value-based compensation element.
Governor Haslam stated that in negotiations with the federal government, differences remain that need to be resolved regarding copayments and wrap-around services. Tennessee is one of at least ten states in which such a “private option” has gained traction.
The Arkansas Model
Also on April 2, Secretary of Health and Human Services Kathleen Sebelius sent Arkansas Governor Mike Beebe (D) a letter showing “conceptual support” on a “private option” with the Secretary, following a February 23 verbal agreement between the two parties. Secretary Sebelius stated that she looks forward to receiving Beebe’s detailed demonstration proposal. Instead of increasing the number of enrollees in Medicaid under the Affordable Care Act’s Medicaid expansion provisions, Arkansas will use federal Medicaid expansion money to purchase private insurance for Arkansans living below 138 percent of the federal poverty level through the health insurance exchange.
Arkansas and Ohio are currently negotiating with the Obama Administration to formalize such a “private option” arrangement. The “private option” is gaining in popularity – with Republican lawmakers and governors in Florida, Louisiana, Maine, Missouri, Oklahoma, Pennsylvania, and Texas also expressing interest in similar coverage arrangements. In order for the private option to become law in Arkansas, it must receive 75 percent of the state legislature’s vote.
Joan Alker, Co-Director of the Georgetown Center for Children and Families, stated that this “private option,” where states purchase private insurance to subsidize coverage, is also known as “premium assistance.” Alker states that premium assistance is authorized under Sec. 1905(a) of the Social Security Act and is currently being implemented by a few states on a small scale. In a Q & A released March 29, Centers for Medicare & Medicaid Services stated that it would consider states’ premium assistance demonstrations so long as they were budget neutral, among with other stipulations.
To see the full Q & A, pleae click here.
Positives and Negatives
Those favoring the “private option” over traditional Medicaid expansion cite several points. Some, including Representative Bill Cassidy (R-LA) - who is a physician - point to the greater efficiencies of private insurance over Medicaid. Beneficiaries could also have greater choice of coverage through a private option. Additionally, providers would be more willing to accept private insurance than Medicaid, given the former’s likely higher reimbursement.
According to Tami Luhby of CNN.com, the beneficiaries would benefit from continuity of care, as they would be able to continue receiving coverage if their incomes increase above the Medicaid threshold, whereas those on the traditional Medicaid program would be dropped from Medicaid in similar circumstances. This would avoid a Medicaid “churn,” i.e., enrollees dropping in and out of the Medicaid program, which would significantly reduce costs to states.
A private insurance mode, however, also has setbacks. The costs of private insurance tend to exceed those of Medicaid. The Congressional Budget Office estimated the per-person difference in cost to be $3,000.
See page 4 of the report here.
Given that the Obama Administration is asking Arkansas and Ohio to demonstrate that their private options are not more expensive than traditional Medicaid as a condition for formal approval, this could be problematic. Robert Pear of the New York Times noted that Medicaid has strict provisions limiting copays and deductibles, and also provides many services that private insurance may not including: dental services, personal attendant services, long-term care, and medical equipment.
Support is growing in several states other than Tennessee for adopting the Arkansas Model. While Florida legislators are currently rejecting Medicaid expansion as proposed by Governor Rick Scott (R-FL), the Florida Senate has advanced a bill that would use Medicaid expansion funds to purchase private insurance for the expanded population.
Although Texas Governor Rick Perry (R) officially declined to expand his state’s Medicaid program last July, State Senator Tommy Williams (R), chairman of the Senate Finance Committee, proposed a “Texas Solution” to increase coverage, which would include a private insurance component.
Ohio’s House of Representatives are currently deliberating how to expand coverage - and are considering the Arkansas Model among others. Governor Bobby Jindal’s (R-LA) Department of Health and Hospitals Secretary Bruce Greenstein stated that he was looking forward to hearing more about the details of the Arkansas Model, including how private insurance and the exchange were to be incorporated.
Pennsylvania Governor Tom Corbett (R) publically stated that he could not support Medicaid expansion at this time, and met with Secretary Sebelius on April 2, where he also signaled an interest in the Arkansas Model.
Much remains to be seen regarding the “private option.” Details of the Arkansas Model have not yet been released, nor has the Arkansas legislature voted on it. Additionally, the Obama Administration has yet to formally approve the Model, which may necessitate a waiver. Specific private insurance carriers have yet to be named, and it remains unclear if home health services will be covered.
Despite the uncertainty, home health providers can look to the Arkansas Model as potential opportunity for increased reimbursement that may surpass Medicaid rates. However, commercial plans may also negotiate lower rates than Medicaid, as done in the past, in order to achieve budget neutrality. Home health providers should continue to monitor the status of Medicaid expansion in their states. The traction that the Arkansas Model has already garnered may be an indication of things to come. Home health providers are encouraged to contact NAHC with any questions or concerns.