Still following Arkansas Medicaid expansion developments? Us too!
On Thursday, Sara Rosenbaum, Chair of the Department of Health Policy at George Washington University School of Public Health, published a technical and authoritative summary on the legal grounds for Arkansas’ expansion. It mostly gels with our take last weekend. We gather two clarifications:
- Rosenbaum treats the proposed HHS regulation (rule 435.1015) as uncontroversial—it doesn’t conflict with the Medicaid statute. We defer to her judgment here.
- Though 435.1015 might be valid, she also finds it vague. As we excerpted in the original post, to use Medicaid funds for private insurance, the cost of the new plans “must be comparable to the cost of providing direct coverage under [Medicaid].” Rosenbaum takes issue with “comparable”—what does that mean, empirically? We suggested “at or below the cost of Medicaid,” but perhaps HHS intended something different. For clarity, we use that term instead of “cost-effective” now.
If HHS creates a narrow operational definition of “comparable” in rule 435.1015 and the Arkansas proposal is passed without meeting that criteria on paper, HHS is contradicting it’s own regulation. This would be—legally—a problem .
So, the Arkansas deal is on sound footing as long as plans offered on the exchanges are of “comparable” cost, however HHS defines that. We never disputed this—but we have trouble understanding how legislators think they’ll meet that threshold. There is good reason to think that plans on the exchanges will cost substantially more than a Medicaid expansion would. Massachusetts is useful for lessons like this; it’s had an insurance exchange in place since 2006. The average cost of an individual exchange plan was $5,143 in 2009. That same year, their average Medicaid expenditure per nonelderly/nondisabled adult was $2,965. See a difference? For a coherent breakdown of why private costs aren’t likely to come in line with Medicaid, see Austin Frakt’s recent analysis over at The Incidental Economist.
We still need to know how Arkansas legislators intend to see plans cut without violating essential health benefits or any other Medicaid/exchange requirements. Some have cited savings from churn reduction, but I haven’t seen evidence that suggests savings would scale in a way that makes sense. David Ramsey usefully points out that total administrative costs for a conventional Medicaid expansion—churn would only account for a fraction of this—would cost Arkansas $14 million annually; that’s small potatoes compared to projections for the total overall cost of the proposal. Moreover, a “conventional” expansion already has some buffer for those who cycle in and out of the 100-138% FPL range .
There’s also a “risk pool” question. As a general trend, people of higher incomes tend to enjoy better health status—which tends to make them cheaper to insure. The Arkansas Surgeon General believes that including the newly-eligible in the insurance exchanges increases the overall risk of those pools—that’s not to say that they’re very sick, but they might, in the aggregate, have poorer health than their 138-400%FPL exchange counterparts. Insurance companies usually hedge against higher risk by raising premiums. Except, now, we’re ostensibly increasing overall risk while asking these same insurance companies to decrease their costs—to levels approaching Medicaid. That’s going to be tricky.
From a practical (if not legal) perspective, we also have to consider how those costs—comparable or not—are covered. Recently publicized emails among AR state leaders reveal that, assuming this deal is more expensive, they could make up state budget shortfalls through cuts to the existing Medicaid program’s benefits—by adding copays, shifting enrollees to other programs (like the exchanges), cutting payments to providers, and eliminating funding for uncompensated care and Community Health Centers. Before we raise a ruckus, let’s be clear that emails are not the same thing as policy. Still, it leaves us concerned: in essence, the effect is to take from the most poor (currently in Medicaid) to benefit the less poor (those in the Medicaid/insurance expansion). Again, this is far from actual policy, and details are sparse, but nonetheless it’s troubling. (More information in this superb, though gated report.) (Addendum: See this new piece from David Ramsey of the Arkansas Times for more nuanced detail about these cuts; notably, they are “transfers and savings that would have happened under the original Medicaid expansion plan.”)
There is, of course, an alternative scenario: HHS could define “comparable” generously enough to make this feasible. That would mean this gets expensive for the nation—fast. According to emails obtained under FOIA by Charlie Frago of the Arkansas Democrat-Gazette (paywall), a top CMS official told Arkansas and Ohio “not to lose sleep over cost comparability. They [CMS] apparently are comfortable in their interpretation of the rules on this.” (Addendum for clarity: these are Arkansas state officials characterizing discussions with CMS, not emails from CMS officials.) New York and Texas are also toying with this idea, and Rosenbaum expects that it’d “spread like wildfire.” We’ll spare you a rehash of our analysis; we covered the implications pretty thoroughly last week.
Curious creatures that we are, we have some outstanding questions.
- If Arkansas’s proposal is “comparable” on paper, but not in practice, who’s on the hook for the difference? Arkansas or the federal government? The statutory language doesn’t create a “hard cap,” and the regulations don’t seem to clarify .
- Do all plans on the exchange have to meet the comparability criteria, since newly eligible would be empowered to “shop around” like any other consumer?
- If so, won’t that discourage variety among different exchange plans, since it creates a price ceiling? Might it discourage insurers from participating on the exchange at all?
Footnotes (Yes, more footnotes!)
1. This actually creates a second tricky question: if HHS violates its own regulation, who has standing to sue HHS? This is something I touched on briefly in my correspondence with Timothy Jost. I can’t, as a taxpayer, point to the agency and cry foul (well I can, but it wouldn’t have any legal force). Someone could theoretically sue because they were forced to seek private insurance over Medicaid, but they might have a hard time demonstrating “harm,” if that’s necessary. Perhaps there’s a violation of contract interpretation that insurance companies could probe? I’m not sure.
2. People who fall between 100-138% FPL qualify for Medicaid or for subsidies on the exchanges, so there’s room to maintain coverage if one’s income fluctuates into this range. That means churn will only occur where someone with >138% FPL falls below 100% FPL and vice versa. (Addendum: There may be more complexity to buffer offered (or not) by this overlap. Refer to the comments below for more information.)
Adrianna works in clinical research and is a graduate student in public policy & public health at the University of Michigan. Follow her on Twitter @onceuponA.
Karan is a first-year student at Robert Wood Johnson Medical School and Duke graduate who previously worked in strategic research for hospital executives. Follow him on Twitter @KRChhabra.