Arkansas Deal with HHS on Medicaid Expansion May Make Everyone Better Off

New results from Arkansas suggest that Colorado officials in favor of Medicaid expansion may be able to negotiate a better deal for both low income people and state taxpayers. Arkansas Governor Mike Beebe has negotiated an alternative to the standard Medicaid expansion offered by the federal Department of Health and Human Services under the ObamaCare law.

Health and Human Services has agreed that Arkansas can pay premiums for commercial insurance purchased through the state’s health insurance exchange using the federal funding that would have gone to expand Medicaid. The program will extend commercial coverage to adults earning up to 138 percent of the federal poverty level. New reports say that Arkansas can opt out and return to regular Medicaid at any time.

Federal law prohibits offering subsidies for commercial insurance to people who are qualified for Medicaid. Aside from its cost and the fact that it encourages the almost 1/3 of people with private insurance to switch to a public program, Medicaid expansion would unfairly deny people with incomes between 100 and 138 percent of the federal poverty level the chance to enroll in the heavily subsidized commercial insurance policies offered by the ObamaCare exchanges.

For those who are not disabled, commercial insurance is more flexible than Medicaid and offers better access to health care. Medicaid reimbursement for specialist care is far below commercial reimbursement and people with Medicaid coverage often have a difficult time accessing specialists. Arkansas was one of the states in the Robert Wood Johnson Cash & Counseling experiment. Where Medicaid reimbursement rules were below prevailing wages, it was impossible for clients to get the services they were promised. Other work has reinforced the Cash & Counseling results by showing that coverage expansions without payment reform may improve access to coverage without improving access to actual medical care.

Even though Medicaid reimbursements are lower, studies suggest that commercial insurers do a better job of controlling costs. They have more flexibility and less regulatory overhead than Medicaid. They also have more incentive to minimize charges and to work with patients to promote faster recovery.

Studies of pediatric surgery suggest that Medicaid patients have greater morbidity, hospital lengths of stay, and total charges even after controlling for differences in patients, hospitals, and operations. In cardiac valve operations and bypass surgery, Medicaid patients had higher risk-adjusted in-hospital mortality, accrued longer hospital stays, and posted higher total costs than either the commercially insured or the uninsured. For adolescent ACL injuries, time to diagnosis averaged 14 days for people with private coverage and 56 days for people with Medicaid coverage. There were no differences in delays due to patients not seeking care.

Rapid diagnosis and treatment is especially important for low income people. The time price of care matters when missing work means missing wages and showing up late can get one fired.

Substituting commercial insurance for the Medicaid expansion may also be better for hospitals, physicians, and the people who pay for their own care along with everyone else’s. The Colorado Hospital Association says that low Medicaid reimbursements make hospitals lose money on Medicaid patients. To make up for those losses, its members charge more to people who pay for their own care. Since commercial reimbursement generates less uncompensated care, it presumably reduces the cost shift and therefore the cost to private payers. The losses are substantial and growing. In the state of Washington in 2006, hospitals lost 15.4 percent on Medicare and 15.6 percent on Medicaid. They made 16.4 percent on commercial business.

The possibility of a deal with Health and Human Services gives Colorado officials a rare chance to improve the medical care available to low income people by shaking off the shackles of Medicaid.

We can only hope that they care enough to follow Governor Beebe’s example.

Comments (13)

Trackback URL | Comments RSS Feed

  1. Christian Boozer says:

    And thus a glimmer of light from the end of the tunnel. I bet , in 2020, Obamacare will look nothing like we envision it will in 2014.

  2. Kyle says:

    If it makes you feel better, the payment schema for the VA (federal healthcare) is just as bad. Congressional testimony 6 months ago revealed that the VHA had a combined authorization and improper payment rate error of 30 percent over just the 6 month period examined.

  3. Jordan says:

    @Kyle,

    No. It doesn’t make me feel better. Obamacare isn’t going to be just like the VA though. I read that OIG Testimony. They said external outpatient physicians were the most egregious offenders because they didn’t review line item expenses, they often just signed off on them. Who cares, the Government is picking up the bill right?

    Phaw.

  4. Peterson says:

    “Even though Medicaid reimbursements are lower, studies suggest that commercial insurers do a better job of controlling costs.”

    – Was there ever any doubt that private insurers are better at controlling costs?

  5. Tom says:

    @Peterson

    The government would like you to believe that medicaid is efficient and effect. However, I know people who have had serious problems with Medicaid and their inability to communicate with the people they cover.

  6. Angel says:

    “They also have more incentive to minimize charges and to work with patients to promote faster recovery.”

    Minimize charges, minimize charges, minimize charges! It’s our health we’re talking about!

  7. Vladimir Viatopolkovich says:

    The private sector is greedy. Only the government can stop the capitalists from their mercenary pursuit of profit on the backs of average middle- or lower-income workers. Cost is irrelevant. Your distrust of the government makes it difficult for Medicaid and Medicare to accomplish their goal. There are benefits to society despite the monetary losses these programs incur. I believe the former is more important.

  8. Angel says:

    “Substituting commercial insurance for the Medicaid expansion may also be better for hospitals, physicians, and the people who pay for their own care along with everyone else’s. The Colorado Hospital Association says that low Medicaid reimbursements make hospitals lose money on Medicaid patients. To make up for those losses, its members charge more to people who pay for their own care.”

    It’s all good. Just charge us more to make up for the losses due to government-run health care, right? Go ahead?

  9. Christian Boozer says:

    Seems fair to me Angel. How would you like to be the top brass at a large firm who has to explain to the shareholders that the reason they took a loss and won’t be paying divedends is because of Medicare and Medicaid. That simply won’t do. My 401(k) isn’t very diversified. I am heavily invested in the health care industry, so I’m glad you are paying more!

  10. Gabriel Odom says:

    Vladimir is a troll. Ignore him.

    “For adolescent ACL injuries, time to diagnosis averaged 14 days for people with private coverage and 56 days for people with Medicaid coverage. There were no differences in delays due to patients not seeking care.”

    This is what happens when a market suffers price controls: goods are rationed. A 54 day waiting period is a ration, make no mistake about that.

  11. Patel says:

    Again, the reason why health care cost so much is because market forces don’t govern the health care industry, if it did, we wouldn’t have to worry about all these high fees.

  12. Devon Herrick says:

    This sounds like a much better deal for enrollees than traditional Medicaid. I’ve heard that one obstacle are strict rules that require commercial insurers to provide benefits equivalent to what Medicaid promises (on paper) — but often fails to deliver. For instance, similar cost-sharing, and so on. I would rather allow states to experiment and decide what type of private coverage works best.

  13. Baun ... Al Baun says:

    I can understand the precept that private insurers watch the pennys closer than do public providers, so as to increase their bottom line.

    I can understand the precept that private insurers place the interests of the bottome line ahead of patients … and therefore avoid unprofitable procedures.

    The most pragmatic solution to address these issues is to have private insurance for all … cap profits for those private insurers in exchange for increasing customer pool size … and regulate what private insurers must cover. Oops, I guess we already have that now … PPACA.

    The heavy lifting is done, but I applaud the HHS and cooperation with States in modifying Obamacare in ways that make sense.