However, both supporters and critics of the healthcare reform law's Medicaid expansion doubt that the Arkansas approach can deliver broader coverage while staying within state auditors' spending projections and meeting the federal requirement that the approach be “cost effective” compared with adding enrollees to Medicaid.
The idea of putting enrollees into a competitive market instead of a state-run program has been enough to garner significant Republican support in the conservative state. A state Senate committee last week unanimously approved Beebe's Medicaid expansion bill.
The experience for Medicaid beneficiaries and the providers that care for them, however, is likely to be starkly different than what they'll get with most plans offered in those marketplaces. Only a small number of plans are likely to offer the broad benefits, limited cost sharing and nearly unrestricted provider networks that will be required to meet CMS requirements for Medicaid beneficiaries.
“There are a lot of open questions about this; the cost effectiveness test may be hard to meet,” said Joan Alker, co-director of the Georgetown University Center for Children and Families.
The growing number of states considering variations on premium assistance plans—including Ohio, Pennsylvania, Florida, Alabama, Montana and Utah—will need to get the plans through their legislatures and also win CMS approval.
That could be a tough sell. HHS laid out federal guidelines March 29 for states seeking waivers along the lines of what's in the works in Arkansas. The guidance included a requirement that the states maintain “comparable” costs between a standard Medicaid expansion and the costs of premiums, “additional services” and cost-sharing assistance for Medicaid-eligible residents who would instead get coverage in the exchanges.
State actuaries estimated in late March that compared to a standard Medicaid expansion, the Arkansas plan over 10 years would cost the state $61 million less and the federal government $592 million less. The numbers assume significant savings from competitive pressure in the exchange.
Some policy experts, though, say the approach may cost more than traditional Medicaid, in part because providers generally would get higher payments negotiated with insurers instead of the rates set by the state Medicaid program.
The use of insurer rates in the Arkansas plan was important to hospitals in the state, Bo Ryall, president and CEO of the Arkansas Hospital Association, said in an e-mail. “The plan does not have provider payment rates set in the legislation,” he said. “The market will decide.”
Elaine Ryan, vice president for state advocacy and strategy at AARP, which has partnered with hospitals to push states to expand Medicaid, said hospitals could benefit from higher rates but the extent of their financial boon is unknown. “We don't know what the cost of the insurance plans will actually look like in the exchange and won't know that until September” when exchange plan rates and premiums are released, Ryan said.
The financial benefit for hospitals and other providers could be substantial. A March 2013 analysis by the liberal Urban Institute concluded that even the standard Medicaid expansion would boost hospitals' Medicaid revenues by $27.9 billion, or 23%, in 2016. The estimate accounted for Medicaid and Medicare cuts required by the Patient Protection and Affordable Care Act.
Private insurance rates, which are about 50% higher than Medicaid rates, could help lift the 10-year Medicaid payments nationwide from $295 billion under a traditional expansion to $518 billion if every state put newly eligible residents into the exchanges, according to a December 2012 report by the conservative National Center for Policy Analysis.
The Congressional Budget Office projected that coverage provided through exchanges would be 50% more expensive than the $6,000 average cost of coverage provided by traditional Medicaid plans—due primarily to higher private insurance payments to providers. But that difference is likely to narrow because Medicaid rates will rise to ensure that millions of new beneficiaries can actually find providers to care for them, said Matt Salo, executive director of the National Association of Medicaid Directors.
“Some of that stark 50% difference will not bear out in the real world,” he said.
But the opportunity to get paid more than they would under Medicaid's traditionally meager rates may encourage hospitals to lobby for the approach, according to some policy analysts.
“In states that have already signed onto the Medicaid expansion, providers would do well to try to persuade those states to adopt something like the Arkansas plan where they are going to get higher rates,” Avik Roy, a scholar at the conservative Manhattan Institute, said in an interview.
In Ohio and Pennsylvania, which like Arkansas are considering premium assistance approaches, hospitals are not expected to receive the higher rates paid by private insurers. Although the final details of those plans have yet to emerge, policy experts said they expect the plans to call for traditional rate-setting by Medicaid officials.
Salo said differences such as that one reflect priorities among state leaders. Ohio leaders, he said, appeared more focused than Arkansas on reducing administrative complexity and lowering costs. “If it didn't look like it would be administratively easy, if it didn't look like it was going to be cost effective, then perhaps they became less interested.”
Ultimately, the complexity of details such as rate-setting may prevent many states from completing plans and getting them enacted in the time left in their legislative calendars.
“Expanding your Medicaid program is relatively easy for states compared to getting these new marketplaces up and running because they are a whole new kettle of fish,” Georgetown's Alker said.