Governor seeks new concessions from CMS to maintain Arkansas' medicaid expansion

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Arkansas Gov. Asa Hutchinson is set to meet Monday with federal officials in Washington to negotiate the future of the state's Medicaid expansion program, which leading Republicans say could be killed if it's not changed.

No state has seen its uninsured rate fall faster since the implementation of the federal health law than Arkansas, where it has fallen more than half, to 9.1 percent, from 2013 to 2015. Most of the credit goes to the state's decision to expand eligibility for Medicaid, which has provided coverage for around 250,000 low-income Arkansans who make up to 138 percent of the federal poverty level -- about $16,000 for an individual and $33,000 for a family of four.

However, in a red state like Arkansas, dominated by anti-Obamacare lawmakers, the future of the expansion is politically tenuous. In 2013, Democratic Gov. Mike Beebe worked with a Republican-controlled legislature to craft a bipartisan compromise that became known as the "private option": The state received a waiver from federal rules to use Medicaid funds to purchase private health insurance plans for most newly eligible beneficiaries, rather than placing them in the traditional Medicaid program.

That waiver expires at the end of 2016, and Hutchinson -- Beebe's Republican successor -- is now seeking additional GOP-friendly tweaks to the program. Legislators are watching closely.

"My read on the politics is that if the federal government does not consider out-of-the-box and unprecedented measures, there's a high likelihood that it's not going to have the political support to get through the Arkansas legislature," warned Republican state Sen. Jim Hendren, chairman of the state's health reform task force (and the governor's nephew).

Haggling with federal officials over what is allowed in the Medicaid program has become a familiar dynamic in GOP-controlled states across the country. Since the 2012 Supreme Court ruling that upheld the Affordable Care Act but gave individual states the choice on whether to expand Medicaid, 31 states and the District of Columbia have accepted federal money to expand the program. Nineteen states have declined, leaving an estimated 3 million people in a coverage gap because they don't qualify for Medicaid or subsidies to buy private policies on the Obamacare exchanges.

In addition to Arkansas, leaders in Iowa, Indiana, Michigan, Montana, and New Hampshire have negotiated waivers to expand Medicaid that have included Republican-backed policy ideas, such as privatized schemes, wellness and work programs, and "skin in the game" in the form of cost-sharing or premiums.

"CMS [the federal Centers for Medicare & Medicaid Services] wants states to do the Medicaid expansion, so they have rolled up their sleeves and tried to get to yes on all these agreements, without compromising the fundamental integrity of the Medicaid program," said Joan Alker, executive director of Georgetown University's Center for Children and Families and an expert on Medicaid waivers.

For reasons both philosophical and political, Hutchinson hopes to negotiate further alterations. After the governor's one-day meeting with federal officials, they will likely continue to hammer out details in the coming weeks. If an agreement is reached, Hutchinson is expected to present it to the state's health reform task force on Feb. 17.

Hutchinson calls his proposed new policy "Arkansas Works." He described its framework -- which would continue the expansion via purchasing private health care plans for beneficiaries -- in a December letter to U.S. Secretary of Health and Human Services Sylvia Burwell.

Hutchinson's main requests are to charge small premiums or other cost-sharing for some beneficiaries, encourage employment and healthy practices, and make more use of employer-sponsored insurance plans. Medicaid-eligible beneficiaries who are employed and are offered insurance at work would be required to enroll in those plans rather than Medicaid. The governor would have Medicaid pay the difference in costs to beneficiaries as well as provide any Medicaid benefits not offered by the employer plan.

Hutchinson has made clear that he would like to establish work requirements as a condition of eligibility, but the Obama administration won't allow states to insist that beneficiaries have a job. The federal government is more flexible on ways to encourage employment, and under Arkansas Works, the state's Department of Human Services would refer unemployed or underemployed beneficiaries to job training programs.

Certain beneficiaries, meanwhile, would be assessed premiums, likely around 2 percent of their income (at the poverty line, that amounts to $20 a month for an individual or $40 a month for a family of four). The governor envisions carrot-and-stick incentives to encourage healthy behavior. Those who follow practices such as visiting a primary care physician upon signing up could have their premiums waived; those complying with wellness and work referral requirements might also get additional vision and dental benefits not normally included under Medicaid.

"It's a grab bag of the kinds of ideas that are being tossed around in the handful of states that are doing expansion by waiver," Alker said. "The risk is creating barriers to access to care for beneficiaries and creating additional bureaucracy." Most of the governor's requests "are in the ballpark of the kinds of things CMS has been negotiating," she said. "I think on most of those issues, they will find a way."

Some requests from Hutchinson may not fly with the federal government. One is a fee that would be imposed on beneficiaries with substantial assets -- such as a house valued at $200,000 or cash-equivalent assets of $50,000 or more -- in order to stay enrolled. "The governor feels like that's a common sense request, but there's going to be a lot of pushback on that," said Arkansas Surgeon General Greg Bledsoe, who is joining Hutchinson in Washington. "We're hoping to get maximum flexibility."

Asset tests for most Medicaid beneficiaries were explicitly banned by the ACA and Alker said it was unlikely that federal officials would cave on this point.

Previously, Hutchinson backed another controversial idea, a punitive "lockout" provision that would bar beneficiaries from regaining coverage for six months if they failed to pay required premiums. The lockout provision is unmentioned in his letter to Burwell, however, and the governor has been cagey about whether it's still a request on the table.

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"We will not be a part of any provision that says you cannot have coverage because you are poor or because you can't make a payment," said Democratic Rep. Reginald Murdock, a vice chairman of the state's health reform task force. Murdock said that Democrats in the legislature were on board with the Arkansas Works framework as described in the letter to Burwell but would seek to block any changes to the private option that "undermined the tenets of the ACA."

Whatever the governor and the federal government agree to, if the legislature doesn't approve of the plan this spring, that won't just threaten health insurance for hundreds of thousands of Arkansans. It will also stop the flow of federal money paying for their health care. Under the health law, the federal government pays all the costs of Medicaid expansion for three years, with the states paying a small share in the future.

According to a state consultant, ending the expansion would cost the state budget more than $400 million between 2017 and 2021 and cost hospitals $1 billion in uncompensated care expenses over the same period.

The state constitution requires a 75 percent majority of lawmakers in both chambers to approve continuing the expansion, a tall order for a controversial program. Hendren, who said he is prepared to walk away if he's not satisfied, acknowledged that if the expansion is not continued that would lead to "pain in the budget, and there's going to be a lot of people who are upset if we have to make cuts. There's no question that the stakes are high."

Kaiser Health News (KHN) is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation.

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