Arkansas bid to impose Medicaid cost-sharing tests administration

Arkansas, the first state to establish the conservative private-plan model for expanding Medicaid under the Patient Protection and Affordable Care Act, now is looking to join several other conservative-leaning states in requiring low-income beneficiaries to make monthly contributions to their health coverage in the form of a health savings account.

The state has proposed to the CMS that beginning in 2015, its Medicaid beneficiaries would have to contribute to “health independence accounts.” People with annual incomes between 50% and 99% of the federal poverty level would contribute $5 a month to their accounts, while those earning between 100% and 138% of poverty would pay between $10 and $25. The state would provide a matching contribution of $15. Money would be drawn from the accounts for copayments on medical services.

Failure to make the monthly contributions would force those earning between 100% and 138% of the poverty level to pay all cost-sharing out of their own pockets.

Traditional Medicaid features little or no cost-sharing. The Arkansas waiver proposal also would limit non-emergency transportation benefits, which is opposed by patient advocates and healthcare providers.

“It's about trying to educate this population about healthcare and healthcare costs and insurance and how it all works,” said Amy Webb, a spokeswoman for the Arkansas Department of Human Services.

Some observers say they believe the Arkansas proposal has a reasonable chance of receiving approval from the Obama administration, though it's unlikely the administration will allow cost-sharing for people below the poverty line.

The reason the administration may give it the green light is because Arkansas' Republican-controlled Legislature will need a 75% supermajority vote to renew its Medicaid expansion next year and is unlikely to do so without conservative-supported changes, which lawmakers included as part of an appropriations bill earlier this year.

If lawmakers don't renew the expansion, more than 175,000 Arkansans would lose coverage.

And the administration's effort to persuade other conservative-leaning states to adopt Medicaid expansion would suffer a big setback. Arkansas and its Democratic governor, Mike Beebe, led the way in finding a compromise approach under which the state uses federal Medicaid expansion funds to buy low-income adults private coverage through the federal insurance exchange.

“I think it would be hard for both CMS and the state to walk away from it right now,” said Joe Touschner, senior health policy analyst at Georgetown University's Center for Children and Families. “I think there's a good chance that they'll come to some sort of an agreement.”

Similar Medicaid health savings account programs exist in Michigan, which has expanded Medicaid, and Indiana, which has not. Michigan's program applies only to people earning above 100% of poverty.

Indiana Republican Gov. Mike Pence wants to include the savings account feature in his Medicaid expansion proposal, while Iowa requires a premium contribution for people earning at least 100% of poverty.

Pennsylvania Republican Gov. Tom Corbett also wants to require Medicaid beneficiaries to make monthly contributions as part of his pending waiver request for expanding Medicaid.

But critics say these types of cost-sharing programs will discourage people from signing up for Medicaid and delay them from seeking needed medical services.

A decade ago, when Oregon required Medicaid beneficiaries to make premium contributions and boosted copayments, enrollment plummeted 77% and the state's uninsured rate jumped. “Even modest co-payments have a detrimental effect on utilization,” said Gerald Kominski, director of the UCLA Center for Health Policy Research.

In addition, such cost-sharing can have a negative financial effect on healthcare providers. Imposing premiums and cost-sharing on Medicaid beneficiaries can result in declines in coverage and utilization that can produce some savings for states, according to an analysis last year by the Kaiser Family Foundation.

But those changes may be offset by additional administrative costs and can lead Medicaid patients to rely more heavily on already-strained safety net providers. In addition, according to the report, Medicaid providers frequently report difficulty collecting cost-sharing amounts, thus lowering provider payments.

Follow Steven Ross Johnson on Twitter: @MHsjohnson