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Medicaid

Arkansas is a role model in health policy: Column

Arkansas has expanded coverage through Medicaid by purchasing commercial insurance, and it's worked.

Joe Thompson
House Speaker Paul Ryan on Capitol Hill on March 9, 2017.

In a recent meeting with our nation’s governors, President Trump voiced a revelation that health care “is an unbelievably complex subject.” The governors and their Congressional colleagues are calling for simple fixes and will soon face the same recognition. In addressing a Joint Session of Congress, the president called for sweeping changes to "save us from this imploding healthcare." Now with a plan on the table, the Republican led Congress faces a challenge not unlike the Democratic-led Congress faced eight years ago.

Commitments being made to the American people will be difficult to keep unless innovative strategies are deployed that recognize fundamental principles in the delivery and financing of healthcare. The Arkansas approach using Medicaid funding to purchase commercial insurance is emerging as one of the most successful approaches to date.

Conceptually, the goal of Obamacare — no underwriting for pre-existing conditions, guaranteed issue, plan and provider choice and more affordable premiums through a sliding scale of tax credits — was laudable. The operational aspects, however, have proven challenging for most states.

Individuals signing up through the marketplaces in many states are older and sicker. The young and healthy are not attracted to the more costly and broad essential health benefit. The penalties for non-participation are too weak to ensure adequate uptake. These cause adverse risk selection and thus premiums to rapidly escalate. Many of the marketplaces nationwide have experienced double-digit rate increases, and insurers are exiting the market.

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Arkansas stands out as a singular exception to other states’ experiences. In 2014, following rigorous debate and a Section 1115 federal waiver, Arkansas expanded coverage through Medicaid by purchasing commercial insurance offered on the new health insurance marketplace. The intent was to achieve better care, stabilize the private insurance marketplace, increase competition and avoid growth in state government.

By injecting a large guaranteed purchaser of newly covered lives into the marketplace through Medicaid premium assistance, the state enabled establishment of a larger, more stable risk pool than other states. The adverse risk experienced by other states was diluted by enrolling younger and potentially healthier low-income individuals receiving other state services (e.g., Supplemental Nutrition Assistance Program). Because of the volume of the Medicaid purchase — about 300,000 covered lives to date — the existing risk could be spread over more lives. Therefore, the market is more attractive, and insurer competition has increased.

State purchasing decisions to only buy plans that are within 10% of the second lowest cost silver plan, aggressive management through rate review, and retention of the near disabled in the traditional Medicaid program have placed downward pressure on marketplace premiums. As a result, the premium increases observed over the past three years have averaged less than 5.4% per year, and this year are 9.1%, far below the double digit increases observed in the majority of states. Premiums for the lowest cost sliver plans in 2017 were actually lower than in 2016.

In addition to the marketplace impact, expanded coverage through the Arkansas strategy is yielding significant health returns. Arkansas has one of the largest drops in uninsured adults— from 23% to 10%The healthcare system is experiencing a drop in uncompensated care by nearly half. Providers, especially rural hospitals, have been financially strengthened. Because Medicaid is purchasing commercial insurance with commercial provider rates, newly covered individuals in the plans are getting better access, care, and their health outcomes are better than through the traditional state Medicaid program.

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The state budget is benefiting because of the reduced dependence on safety net programs, fewer applicants for health benefits through Social Security, and enhanced federal matching rates for individuals previously with a partial benefit (e.g., pregnancy only). The federal requirement that state Medicaid programs achieve equal access compared to the general population is explicitly met, diminishing the threat of judicial actions.

Some have questioned the expense of Arkansas’s use of premium assistance to purchase commercial insurance as opposed to Medicaid managed care. Comparison of Arkansas’s experience to other states with Medicaid managed care (Indiana, Kentucky) reveal Arkansas’s premiums to be lower than these contracts, which segregate the Medicaid enrollees from the insurance risk pool and thus do not allow the market stability and benefits noted above.

Republicans and Democrats working with the private sector transformed Obamacare into a system that worked. The use of government’s purchasing power for newly eligible able-bodied adults helped address the fundamental rules of insurance coverage in a competitive market while maintaining Medicaid’s safety net role for disabled individuals. The goal of universal coverage was maintained while the rational economic behavior of individuals was allowed. As Congress debates the replacement strategy for Obamacare, acknowledging fundamental prerequisites of health insurance in a competitive market and incorporating these strategies from successful efforts like Arkansas’s for comprehensive solutions will be critical for success.

Joe Thompson, MD, is president and CEO of the Arkansas Center for Health Improvement and served for 10 years as Arkansas’ inaugural surgeon general under Governors Mike Huckabee (R) and Mike Beebe (D). Follow him on Twitter @JoeThompsonMD and @ACHI_net 

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