AP Photo/The Columbus Dispatch, Chris Russell
A number of policymakers on both sides of the aisle cheered when, in April, the Arkansas Legislature passed a law both expanding Medicaid and transforming it into a service available in a marketplace of insurance options, a move known as the "private option." Similar cheers erupted in June when Iowa Governor Terry Branstad approved a similar measure. The legislation marked a major accomplishment-not because the policies are necessarily improvements over traditional Medicaid but because they establish politically palatable paths for conservatives who want to increase access to health care. In Pennsylvania, GOP Governor Tom Corbett-who was against Medicaid expansion and this week announced he is is tepidly for it-has pointed to the these new plans as a model he might consider (among other, more controversial changes.) The private option may be a way to make comprehensive health-care coverage viable in other Republican states-but that depends largely on what happens in Arkansas and Iowa over the next several months.
The key promise of the Affordable Care Act (ACA) is to make health coverage accessible to everyone, regardless of income level, but GOP leaders in Republican-controlled states have fought hard against expanding Medicaid to adults too poor to buy subsidized health plans. The expansion means that the entitlement program will include not only parents who are destitute and the severely disabled, but also adults, with or without children, who make less than 133 percent of the federal poverty line (around $31,000 annually for a family of four). The generous Medicaid benefits package includes prescription-drug coverage and emergency care, as well as regular checkups, all free of charge.
For many Republicans, however, supporting the expansion is tantamount to supporting Obamacare, a political sin not likely to be forgotten. In Congress, for instance, Republicans are debating a government shut down in the hopes of defunding the new health-care plan. In 16 states, GOP governors have actively opposed expansion, and another four GOP governors seem content to weigh options while their legislatures do nothing. Most conservative elected officials don't want to change course and work with the legislation. But because the federal government will pay the vast majority of costs, opting out of Medicaid expansion means shutting the door on billions of federal dollars for states. It also means incurring the wrath of hospitals and health-insurance companies, industries that benefit from higher coverage. Plenty of conservatives might be open to some sort of compromise if it still allows them to save face politically.
Which is why states that couldn't pass traditional Medicaid expansion are watching to see what will happen with Iowa's and Arkansas's measures to send newly Medicaid-eligible people into private insurance plans. To some extent, the programs would work like food stamps do-rather than providing the plan (or food) directly, the government would allow people to choose from existing options and then pick up the cost. But concerns about expenses and quality of coverage have left some health-care advocates suspicious if not downright hostile to the programs.
For now, both states are awaiting federal approval of their plans. Even if they get the OK, they will still have a long way to go to implement the new approach. But based on the outcomes, we may soon see other red states adopting similar models so they can have their Medicaid cake and eat it too.
This Was Never Supposed to Happen
At the time the ACA was written, many states, particularly conservative ones, had Medicaid guidelines that only allowed those with serious disabilities or destitute parents to qualify for the program. The ACA required states to expand Medicaid to cover everyone living under 133 percent of the federal poverty level. Adults who made above the Medicaid cutoff (and below 400 percent of the federal poverty level) would receive federal subsidies to help them buy plans in online insurance marketplaces where they could choose between different, standardized levels of coverage.
Then, last summer, the U.S. Supreme Court ruled that the ACA couldn't require states to expand Medicaid coverage. It was an outcome virtually no one had foreseen, which created a bizarre gap in access to health-care coverage. Under the law federal subsidies are only available to those making more than 100 percent of the poverty line, around $24,00 for a family of four. Those below, who live in states that decided not to expand, would have no options for affordable care. Conservative states, where lawmakers railed against Obamacare, weren't about to expand Medicaid if they didn't have to.
AP Photo/J. Scott Applewhite
Much of the math of the ACA assumes that just about everyone is getting coverage-that means the level of risk insurers take on is lower because plenty of healthy people will participate. It also means the costs associated with poor uninsured people needing emergency care but having no means to pay for it would go down drastically. The Obama administration needs as many states as possible to expand Medicaid so that more people have health-care coverage. It's eager to work with any states that will play ball. But that doesn't mean it will accept just any plan-after all, it's the one paying. In March, as the Arkansas proposal began to come together, the Department of Human Services released a guide for states considering the private model. While it left a lot of latitude, DHS was adamant that states provide "wraparound service"-in other words, supplement the private plans to provide all the benefits of a traditional Medicaid package. When Iowa passed its private-option measure in June, however, lawmakers ignored that particular admonition.
It's Better Than Nothing
While there's tremendous debate about whether the Iowa and Arkansas private options can improve on Medicaid, what they offer is undoubtedly better than no expansion at all. For Judy Solomon, the vice president of health policy for the Center on Budget and Policy Priorities, a liberal economic think tank, what's most important is that people are getting covered. "In a state like Arkansas, there was no possibility there would be a straight Medicaid expansion," she says.
Iowa and Arkansas have a number of similarities. Each is rural with around three million residents, and both came to their plans through bipartisan compromise. In Iowa, the Senate is Democratic while the governor and House are Republican-dominated; in Arkansas, Governor Mike Beebe is a Democrat and both chambers of the legislature are Republican. The states' privatized Medicaid plans also resemble each other. For each, assuming DHS approves, those who qualify will be allowed to select among a few designated health plans already offered through the ACA marketplace. Medicaid has long been criticized because its payment rates are so low that many doctors will not accept them. Under the private options, people will be able to choose between plans with different levels of access and different strengths. Significantly, both states intend to identify those with serious medical needs during the enrollment process and put those people into a more traditional Medicaid program that will provide the full range of benefits.
The key differences between the two plans are in their health-care and safety-net programs. Iowa has long had a robust Medicaid program, which already offered limited coverage to a relatively large swath of low-income adults, while Arkansas's Medicaid system is extremely bare-bones, covering few adults who don't have severe disabilities. According to the Henry J. Kaiser Family Foundation, 18 percent of Arkansans were uninsured in 2010-2011, compared with just 11 percent of Iowans.
Arkansas's program will cover the state's entire Medicaid population-which is growing drastically. Those who qualify will choose from plans on the ACA marketplace, and any Medicaid benefits not provided through the plan will come through separate services the state will provide to "wraparound" the core plan. Medicaid beneficiaries will also have to bear some portion of the cost of their treatment.
Iowa, which has already been operating a Medicaid program for a relatively large population, is implementing changes more gradually. The state is only opening up the private option to those in the highest, Medicaid-eligible income brackets (between 100 and 133 percent of the federal poverty level). Everyone else will continue on traditional Medicaid. Iowa's plan will charge just about everyone with a $20 premium, which can be waived through participating in wellness programs. (Only those making less than 50 percent of the poverty level-or $5,500 for an individual-would be exempt.) The premium is among the most controversial aspects of the proposal and one many expect the federal government to spike. However, no one will pay this premium the first year, and those who get a health-risk assessment and a physical won't have to pay premiums in year two. For those entering the private option, the state has also requested not to provide the wraparound services, instead promising that those who need care beyond what the private plans provide for will go into the traditional Medicaid system.
The Big Concerns
AP Photo/Danny Johnston
The very idea of the privatized Medicaid plan raised suspicion among a number of advocates. When I interviewed him in June, as the plans emerged, Tom Oliver, a professor of population health sciences at the University of Wisconsin and an expert in health-care reform, worried that when push came to shove, privatized Medicaid was mainly about getting more money to insurance companies. "This is a more lucrative deal for the health-care establishment, but it's a worse deal for the Medicaid population," he said.
Folks like Oliver worry that Medicaid beneficiaries in these states will ultimately receive fewer benefits. Iowa's request to be exempt from providing wraparound care raises red flags, as does the decrease in oversight that comes with turning the system largely over to the market. Furthermore, requiring beneficiaries to pay premiums if they fail to get a physical has caused further concerns.
"It's not really clear that they're going to maintain the role of the Medicaid agency to do oversight and monitor," says Judy Solomon.
Medicaid directors in Iowa and Arkansas insist these new programs are a positive step forward. But while their agencies will continue to oversee programs for those with serious or chronic illnesses, they won't be doing as much to oversee the private plans. "How would you define what an underproviding insurer looks like?" asks Andy Allison, Arkansas's Medicaid director. "Where would you set the benchmark, how would you establish a threshold? It's the private marketplace that will set that determination."
Because the ACA requires insurers to cover a number of key services, known as essential health benefits, from mental health care and substance abuse to preventative care and wellness, the state administrators argue that any program chosen on the private market will meet basic needs. Those requiring wraparound services wouldn't be choosing in the private market in the first place, they say-rather those people will be directed to a traditional Medicaid benefits package.
Iowa will "focus on identifying those who need greater access and put them in the right plan rather than trying to tinker with the [private] plans," says Jennifer Vermeer, Iowa's Medicaid director. The premiums, she notes, will push enrollees toward more preventative care; so long as enrollees meet certain preventative guidelines, like getting a physical, they won't need to pay anything.
Allison says much of the concern stems from a misunderstanding about the new programs-instead of setting out the benefits package beforehand, the market will give people a variety of options. "It may take outsiders quite a long time to grasp just how profoundly different this model is," he says. "Medicaid services are being defined by the new standard for price coverage. In other states, the relationship goes the other way."
The difference in Medicaid benefits is nothing new. "Every state in the country has a somewhat different benefits package," explains Michael Sparer, the chair of Columbia University's Department of Health Policy and Management at the Mailman School of Public Health. But there's still concern that there won't be enough oversight to ensure the programs run smoothly and beneficiaries get what they need.
The Cost
Whether these programs prove to be cost-efficient will largely determine whether any other states-particularly Republican ones-undertake similar plans. The federal government will also consider the costs when deciding whether to approve the programs.
While this "privatized Medicaid" will be more expensive, because the private health plans cost more and pay doctors and other health-care providers at higher rates, advocates argue that by bringing more healthy people into the marketplaces-and weeding out those with serious medical needs-the overall risk level will be lower. That's because a smaller proportion of people are likely to require services.
"What they're saying is because there will be all these people, the overall premiums will be cheaper, and that will be good for the federal government," Judy Solomon says. "If you stick within the Medicaid program, I don't think you can make that argument. … They're looking more broadly."
But this will be the first time states have undertaken such a large-scale effort at flagging chronic and serious illnesses. And neither Arkansas nor Iowa has done this before. If they do not identify enough people who need a wide array of services and put them in traditional Medicaid, then those people will instead demand those services from their private insurance, raising the level of risk-and by extension, the cost overall.
A more stable risk pool, meanwhile, should, advocates say, lower premiums for everyone and lower costs of health care for the federal government. A study in The New England Journal of Medicine found, for instance, that the programs would cut down on the logistical problems that waste time and cost money, particularly in families that previously grappled with multiple types of coverage. Ron Manderscheid, executive director of the National Association of County Behavioral Health and Developmental Disability Directors, has written in support of the Iowa Medicaid plan and says the key to savings will be identifying enough people with serious needs and keeping them in traditional Medicaid. Unless the medically frail people get taken out, the system could wind up being more expensive. "There's a tipping point," he says. "If you go far enough in defining 'medically frail,' then you're decreasing the risk pool."
The Advantages
"I'm not convinced it's going to be worse than if they did the expansion the traditional way," Michael Sparer says. It may sound like damning with faint praise, but if the private programs can function as well as Medicaid, it will be no small feat. Even though Medicaid pays low rates to health-care providers, it does offer a wide range of benefits with an impressive degree of efficiency. Many are hoping the new programs may indeed improve the Medicaid model-and not just because "privatized" allows more Republicans to lend their support.
For one thing, by using the private plans, which pay providers more, policymakers in Iowa and Arkansas are hoping beneficiaries will be able to choose from a wider range of care. "They make a strong argument that this is going to provide better provider access," says Judy Solomon, though she notes the same thing could likely be accomplished by simply paying providers more through traditional Medicaid.
Another central argument for these programs is that they'll reduce the frequency of people going on and off the Medicaid rolls. This problem, known as "churn," affects people whose incomes sit on the cutoff for Medicaid-some years they earn too much to get benefits; other years they make little enough to qualify for benefits. But because the privatized program will pay for the same marketplace plans everyone is choosing from, those who get kicked off Medicaid can get their health-care plan with federal subsidies. Jennifer Vermeer, the Iowa Medicaid director, for one, says a key goal of the new program "is definitely to reduce the churn."
Solomon, however, is skeptical. "I don't buy the churning argument," she says. "I think it will just occur at different point."
Yet another hope is that these new programs will better encourage preventative care with incentives like waiving premiums, as in the Iowa plan, if participants get a physical and a health-risk assessment. Down the road, Iowa wants to use premium waivers to encourage quitting smoking, improving nutrition, and the like.
"The Iowa compromise on the Medicaid expansion probably is a better model than was originally envisioned," says Ron Manderscheid citing the potential for the wellness programs. "If they get that implemented and get it to work, that should decrease the risk pool in both traditional Medicaid and the marketplace."
But many key "ifs" remain for the plans-including federal approval. With just months before January 1, when these systems are meant to go into effect, state administrators are scrambling. "My greatest fear is the expectation of immediate and complete success," Andy Allison says. "Obviously, other states are watching."
New Hampshire, which is still debating Medicaid expansion, held hearings in August on the Iowa and Arkansas models, and Allison says that he's heard from other policymakers who will likely see what happens before implementing similar programs in their own states. If the programs can demonstrate success, they may become a model Republican lawmakers turn to in order to both get the federal funding for Medicaid while still claiming conservative bona fides.
"I hope it works," Solomon says. "Because it's going to happen. My feeling is we make it as good as it can be."
