New Arkansas Governor Endorses Medicaid Expansion Model

While Arkansas looks to replace its first-of-a-kind model for expanding Medicaid, Gov. Asa Hutchinson urged lawmakers to renew it through 2016.
by | January 22, 2014

After avoiding a firm commitment in his successful campaign for governor last year, Asa Hutchinson of Arkansas urged state legislators Thursday to renew the first privatized Medicaid expansion model in the country through 2016 -- a difficult task, given the influx of new GOP lawmakers who campaigned against the policy.

The newly inaugurated governor struck a balanced tone throughout the address, highlighting the benefits of expanding coverage to about 210,000 low-income people while acknowledging concerns about future costs and laying the groundwork to replace the expansion with reforms to Medicaid more broadly.

He stressed that the state wants more flexibility from the federal Department of Health and Human Services to do that, arguing the expansion is still only a small piece of a nearly $2 billion program. But after weighing the arguments on both sides, he spoke of the need to end yearly bouts of uncertainty for hospitals and doctors, and to move beyond the debate over the private option to those as-yet unspecified changes to the broader program.

“We recognize that hospitals and health care providers can’t face a dramatic cliff every year when it comes to renewing the private option in the Arkansas general Assembly,” he said.

That means the legislature should reauthorize the program through 2016, he said, while creating a task force to address future changes that become easier starting 2017, when the federal government begins granting far-reaching waivers from health programs if states can show they’ll maintain coverage at an equal cost.

“In regard to the ‘private option,’ it’s time to close this chapter and start a new one,” he said.

The state’s model of expansion, which provides private coverage through the same Affordable Care Act health exchange available to middle-income earners, has proved influential as a host of Republican-leaning states have adopted it or are trying to do so. But the Arkansas Medicaid expansion, originally passed by Republican legislature and signed into law by a Democratic governor in 2013, is uniquely imperiled because the state constitution requires approval of three-quarters of lawmakers for most spending measures.

That means lawmakers have to continually approve funding for the program's implementation, even though it's authorized through 2016. The purpose of Hutchinson's task force is to help come up with ideas to replace it through a broader Medicaid overhaul. But if the state wants to continue drawing a 90-percent matching rate from the federal government, it will have to find a way to maintain coverage for beneficiaries.

The first effort to renew spending last year took five attempts in the House and barely passed both chambers only after conservatives won some new concessions, such as a requiring people below the federal poverty level to contribute to health savings accounts that offset state costs. Legislative leaders have said additional changes, such as greater cost-sharing for patients, will be necessary this time around to assuage critics.

The expansion to people earning 138 percent of the poverty line or below -- about $32,000 for a family of four -- is fully funded by the federal government through 2016, when support phases down to 90 percent. A slim majority of states have passed expansion, but none in the South besides Arkansas.

The high hurdle Hutchinson would have to scale to is fueling criticism from the right that the private option will remain after 2016, only with some minor tweaks. And some Arkansas Democrats took a different reading of Hutchinson's speech. To them, the private option will get renewed after 2016. "I don't think this is in any way an indication that there is an end to the private option on the horizon," House Minority Leader Eddie Armstrong told the Associated Press.

The governor aimed parts of his speech at the state’s legislature, where Republicans expanded their House majority to 64 seats out of 100 and to 24 in the 30-member Senate. While acknowledging that many of the benefits to Arkansas are the result of shifting costs to the federal government, Hutchinson said the state saved about $88 million last year. But he also said about 40 percent of new enrollees are likely jobless, giving a nod to Republicans who want to push for a job-search program within Medicaid in the future, and he wants the task force he recommended to find ways to mitigate state costs estimated at $200 million a year after federal support reaches 90 percent in 2020.

It’s not clear whether adding a job-search component will assuage those new lawmakers who actively campaigned against the Medicaid expansion -- much less the federal government, which has resisted mandatory requirements or anything that could impact health coverage in other agreements with conservative states.

As the legislative session moves forward, legislative leaders who support the expansion say their job will be highlighting the program’s success with more data. Rep. Ken Bragg, the House majority leader, told Governing in an interview shortly after November’s election that the expansion wouldn’t pass if he held an immediate vote. “Right now, if you took a vote based on what everybody ran on, the votes aren’t there,” he said.

But he now argues it will pass the House, in part because he thinks even reluctant lawmakers can rally behind one last extension backed by the state's top Republican. "I think most people realize it’s going to take more time to wind down and come up with another alternative to it," he said. "The private option as we know it, it will be going away, and we’ll have a task force to come up with a solution."

State Sen. David Sanders, one of the chief architects of the expansion, agreed the governor's position changes the vote situation. "The governor had not signaled which way he was going to go, and I think today is not the finish but the start of the process, one in which the chief executive of Arkansas has signaled not just to the citizens here but to the country that he’ll be actively engaged in this issue," Sanders said.