Update: New Estimates Released on Arkansas Medicaid Private Option

by Jeannie Nuss, The Associated Press  on Tuesday, Mar. 19, 2013 7:05 am  

LITTLE ROCK - A plan to use Medicaid funds to purchase private insurance for newly eligible recipients would add less than 15 percent to federal health care costs in the state, according to new estimates that the Arkansas Department of Human Services released Monday.

DHS officials said it's also possible that the so-called 'private option' plan would add no additional federal costs.

The agency worked with legal consultants, actuaries and the Arkansas Insurance Department to come up with the new projection. It's much lower than an estimate from the Congressional Budget Office, which said it would cost about $6,000 per year to cover a person under Medicaid versus $9,000 in the private sector.

"That was kind of a general, national number, and the question was: What does it really mean in Arkansas?" DHS Director John Selig told reporters. Their new estimates show that "instead of a 50 percent increase, it looks like it's short of 15 percent and could be as little as zero added cost to the federal government if we take this approach."

The DHS estimates show that the private option can be fully funded with existing resources at the state level. Department spokeswoman Amy Webb said that estimate refers to administrative costs since federal money would pay for the expanded coverage entirely for the first few years.

Under the private option proposal, low-income citizens — those who make up to 138 percent of the poverty line, which amounts to $15,415 per year — would receive private insurance purchased using federal Medicaid dollars. The insurance would be purchased through the exchange created under the federal health care law.

The private option proposal came from Republican requests to Democratic Gov. Mike Beebe to seek more flexibility from President Barack Obama's administration on Medicaid expansion. Republicans say their suggestions were validated by the DHS figures showing little to no additional federal costs.

"I think the initial numbers from the actuary show credence to the arguments that we've made that this is not only a good option but a viable option and the initial estimates what it would cost were certainly way out of bounds," Sen. David Sanders, R-Little Rock, said. "I think what we're talking about takes into consideration market forces and that's what you're seeing."

DHS points to several factors in the agency's new cost estimate calculations, including the competitive nature of health plan management in the exchange.

"It is likely that introducing 250,000 low-income adults into the private market through the insurance exchange will increase competition among carriers and generate some price pressure on providers since they would then be compensated at competitive rates for all clients," a report released Monday said.

Sen. Jonathan Dismang, R-Beebe, called the figures a positive step as lawmakers weigh the proposal to expand health coverage to low-income Arkansans.

"I think it adds support to the direction that we're moving in," Dismang said.



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