Arkansas Gov. Mike Beebe, a Democrat, proposed the private plan model as an alternative way to expand coverage for low-income residents because the Republican-controlled Legislature opposed the reform law's expansion of Medicaid. Similarly, Republican governors and lawmakers in other states such as Iowa, Michigan and Pennsylvania are asking the CMS to allow alternative models for expanding coverage, which hospital leaders badly want to provide a payment source for uninsured patients. But some of those state proposals include cost-sharing, benefit reductions, job requirements and other features that could make it difficult for the Obama administration to approve them.
The Arkansas plan marks the first time the CMS has granted a waiver for a state to buy private coverage as an alternative to the Medicaid expansion authorized by the ACA. Advocates of the private plan approach say it gives beneficiaries access to a broader provider network and allows a more seamless transition between Medicaid and coverage.
“With the Arkansas Private Option, Arkansas set an example that is still garnering national attention,” Beebe said last week during a radio address. “Instead of railing against the federal government, we found a way to work within the system.”
Approval of Arkansas' Medicaid alternative has potentially opened the door for other states that were on the fence about expanding Medicaid or refused to do so. Rejecting the Medicaid expansion means those states will lose billions of dollars over 10 years.
“If we get to the round two states—states that didn't immediately move ahead to accept the federal money—I think it's certainly going to be a topic of discussion,” said Joan Alker, executive director at the Center for Children and Families at Georgetown University's Health Policy Institute. “But how many states will actually go this route is hard to say.”
The CMS is reviewing a similar model proposed by Iowa. Alker thinks Iowa's proposal will receive federal approval.
Under the Arkansas model, new recipients earning between 100% and 138% of the federal poverty level would be required in the private plans to pay up to 5% of their income for cost- sharing. That could total nearly $800 a year for a person earning a Medicaid-eligible annual income of $15,000, raising questions among providers and advocates for low-income people whether this would be affordable.