Manatt on Medicaid: Arkansas Update—Private Option To Continue, Additional Medicaid Reforms To Be Explored
Authors: Deborah Bachrach, Partner | Patricia Boozang, Senior Managing Director | Anne Karl, Associate | Mindy Lipson, Senior Analyst
In a highly anticipated speech on January 22, 2015, the newly inaugurated Governor of Arkansas, Asa Hutchinson, laid out his vision for charting the future of Medicaid in Arkansas. Governor Hutchinson outlined a plan that would continue the Private Option—Arkansas’s innovative coverage model that uses Medicaid dollars to purchase qualified health plans (QHPs) for individuals in the new adult group—until federal approval for the Private Option sunsets at the end of 2016. He also announced the creation of a task force to explore more wide-ranging reforms of the State’s Medicaid program. Throughout his speech, Governor Hutchinson emphasized two key benefits that emerged from the Private Option: over 200,000 Arkansans who never before had health insurance now have access to coverage and care, and, rural and urban hospitals saw a significant reduction in their uncompensated care costs. He asserted, “These two benefits are facts that we cannot deny, should not deny and should rejoice in.” Governor Hutchinson also noted a shift of costs to the federal government and the benefits to the State budget. Finally, he called for constructive discussion and pragmatic solutions, moving beyond the past political divisiveness over the Private Option.
In April 2013, Arkansas enacted the Health Care Independence Act, which authorized a Medicaid expansion through private market-based coverage (the Private Option). The State received federal approval for the program in September 2013. Under the Arkansas Constitution, funding for the program must be authorized annually by a supermajority of 75% of the Legislature, and the debate over the continuation of the Private Option has been one of the most hotly contested issues in the 2013 and 2014 legislative sessions. In his speech, Governor Hutchinson announced that he will ask the Legislature to fund the Private Option this fiscal year “and continue it through December 31, 2016.” He cited the need for “more predictability” so that hospitals and healthcare providers do not face “a traumatic cliff every year when it comes to renewing the Private Option” and an imperative to avoid harm to those who depend on the Private Option.
In addition to seeking legislative authority to continue the Private Option through 2016, Governor Hutchinson asked the Legislature to create a Health Reform Task Force to make recommendations for modernizing the State’s entire Medicaid program, including alternative strategies for covering the expansion adults. Emphasizing that the State’s expenditures on its traditional Medicaid program dwarf the State’s anticipated expenditures on the Private Option, the Governor underscored the need for a broader examination of the State’s Medicaid program. Although he did not outline any specific policy proposals for the Task Force to consider, he suggested that the Task Force evaluate options that eliminate the need for additional revenue, strengthen the employer-sponsored insurance market, encourage work, promote healthy behaviors, and ensure access to care in rural regions.
Reactions from Legislators
With Arkansas’s requirement that a 75% supermajority reauthorize the Private Option each year, bipartisan support is crucial to the continuation of the Private Option. In 2014, the reauthorization bill passed with no votes to spare in the Senate and by a one-vote margin in the House. The Arkansas Times reports that multiple legislators who have voted against the Private Option expressed confidence that the Legislature would reauthorize the program this year. Senator Bledsoe (R), who has opposed the Private Option, commented, “I loved it. He did a great job articulating his plan . . . I think people are excited.” Representative Farrer (R), another legislator who has voted against the Private Option, was pleased that the Governor’s proposal addresses the entire Medicaid program, saying, “My whole thing was we had a broken system that we never fixed, that we never addressed . . . now at least we get to reform the Medicaid system in Arkansas.” However, not all legislators were satisfied; some affirmed that the Governor’s speech would not change their vote.
Legislative Efforts to Promote Medicaid Reform
As a follow-up to Governor Hutchinson’s speech, Senate Majority Leader Hendren (R) introduced SB96, which would create the Arkansas Health Reform Act of 2015 that provides as follows:
Establishment of Arkansas Health Reform Legislative Task Force
The bill establishes the Arkansas Health Reform Legislative Task Force responsible for (1) making recommendations regarding the establishment of an “alternative healthcare coverage model and legislative framework to ensure the continued availability of healthcare services for vulnerable populations” enrolled in the Private Option and (2) identifying options for reforming the State’s traditional Medicaid program. The recommendations must support goals such as increasing the State’s flexibility in operating the Medicaid program, promoting employment and healthy behaviors, improving access to care, continuing State payment and delivery system reform efforts, and encouraging continuity of coverage. The Task Force’s recommendations are due by December 31, 2015.
Authorization for Department of Human Services to Apply for Future Federal Waiver
The bill authorizes the Department of Human Services to apply for a federal waiver to “transform the Arkansas Medicaid Program into a program with maximum state flexibility in the use of the funds for innovative and cost-effective solutions for the provision of healthcare services.” The State must apply for the waiver by July 1, 2016, prior to the end of the State’s current 1115 waiver, and it may run for a period of up to five years.
The bill contemplates that the waiver request may propose a block grant or global budget cap, defined as an “annual lump sum, calculated on the basis of past and existing Medicaid funding levels, adjusted annually for healthcare inflation.” In addition, the State may propose other reforms, such as managed care for high-need populations. The waiver may include the traditional Medicaid population, current State Medicaid waiver populations, and/or the population covered under the Private Option.
Changes to the Private Option
The bill proposes two immediate changes to the Private Option. First, it will remove the Health Care Independence Act requirement to transition two new populations into the Private Option in 2015: children enrolled in ARKids B (Arkansas’s CHIP program) and parents with incomes below 17% of the federal poverty level (FPL) who were previously eligible for Medicaid. Second, it eliminates the Health Care Independence Act requirement to implement cost-sharing for Private Option enrollees with incomes below 100% FPL in 2015.
Moving Forward
On January 16, Governor Hutchinson, state legislative leaders, and state officials met with federal Department of Health and Human Services Secretary Burwell to discuss forthcoming health reform in Arkansas. In response to the visit, Secretary Burwell sent Governor Hutchinson a letter expressing her support for Governor Hutchinson’s “commitment to an effective and affordable approach to coverage for the newly covered adults beyond the current three-year term of Arkansas’s [Private Option] demonstration and to also move forward on major delivery system reforms that would apply to the larger Medicaid population.”
Arkansas appears poised to continue its recent track record of Medicaid program innovation and transformation.