The End of the Private Option (Blake Rutherford On Politics)

by Blake Rutherford  on Wednesday, Jan. 29, 2014 2:31 pm  

Blake Rutherford

The Affordable Care Act will again cast a shadow over the General Assembly as it opens a fiscal session next month. The primary issue on the agenda is the “private option,” the Medicaid expansion component of the ACA that was approved by the Legislature last year after skillful planning and execution by Gov. Mike Beebe, House Speaker Davy Carter, Sen. Jonathan Dismang and others. 

Under the Affordable Care Act, the state has the opportunity to expand Medicaid to provide health insurance to the 215,000 Arkansans who earn up to 138 percent of the federal poverty level per year, or $15,000 for a single person. The private option does this by allowing those Arkansans to use federal funding to purchase private health insurance. 

In 2013, the Arkansas House of Representatives narrowly approved the private option with only two more votes than the necessary supermajority. It passed the Senate with only one more than required.

But as this year’s fiscal session approaches, the private option is in a precarious state. 

The current political focus is on the Senate, where the dynamic has shifted. In August, Sen. Paul Bookout, a supporter of Medicaid expansion and a Democrat, resigned his office after he was fined by the state Ethics Commission for spending thousands in campaign funds on personal items such as clothing and home theater equipment. Two weeks ago, John Cooper, a Republican, won Bookout’s seat in a special election. Cooper, newly sworn, has said he will oppose the funding appropriation necessary the reauthorize the private option.

So too will Republican state Sen. Missy Irvin, who voted to support funding for the private option last year but has recently changed her mind. As Sen. Bart Hester, a Tea Party loyalist and a member of Irvin’s own political party, said, “I think some people who voted for it are probably … going to have a tough time getting re-elected if they come back here and vote for [the private option] again.”

Last week, a Talk Business-Hendrix College poll found that, by a wide margin, Arkansans view the economy and jobs as the most important issue facing people today. Reauthorization of the private option addresses that issue in its own way. Why should businesses support it? There are a number of reasons.

The growing financial burden of uncompensated care. Uncompensated care amounted to $45.9 billion in 2012, according to the American Hospital Association (PDF), the highest percentage of total expenses in more than a decade. Medicaid expansion through the private option will put a dent in those costs. In January, Baptist Health System CEO Russ Harrington opined that Medicaid expansion would provide relief from $175 million in uncompensated care, a sentiment later echoed by UAMS Chancellor Dan Rahn, who has broadly described the Affordable Care Act as UAMS’ “lifeline.”

The social and economic need for accessible health care in rural areas. Rural hospitals play a central role in the life of rural communities, often as the largest employer and the one with the highest concentration of better paying jobs. They are essential to the quality of life, including the ability to attract and retain business. Often the largest concentrations of uninsured patients live in rural communities, and the burden of uncompensated care can also have dramatic unintended consequences.

The economic opportunity associated with access to affordable investment capital. Additional federal dollars could have a significant effect on Arkansas’ economy. According to the National Association of State Mental Health Program Directors, an increase in federal funds would result in increased business activity, new health care-related revenue, job creation and increased personal income.

The potential to save money. Currently, Arkansas is responsible for 30 percent of the costs for certain Medicaid participants, a cost that would be reduced under expansion. At the same time, $915 million in federal dollars will flow into Arkansas, much of which could be subject to state tax. In all, the Department of Human Services estimates that Arkansas would save $372 million between 2014 and 2020. And in 2021, Arkansas’ expansion cost is estimated to be only $3.4 million more than it would have been by not participating in expansion — a manageable sum considering the savings elsewhere.

What does it mean for business if the legislature defunds the private option? Obviously, the state and its hospitals would realize none of the positive economic effects associated with it; employers could incur a new tax burden of $27 million to $40 million, according to a study published by Jackson Hewitt and shared by the Arkansas State Chamber of Commerce; and more than 70,000 people currently enrolled in the private option will find their insurance status in suspense.

It is philistine to believe that Arkansas' health care system improves by restricting rather than expanding health insurance, particularly to the poor. Yet that turn of mind is likely to prevail. Such is the nature of Republican politics in the age of the Tea Party, and the consequence of Paul Bookout’s misdeeds.

(Blake Rutherford is vice president of The McLarty Companies and previously was chief of staff to the Arkansas attorney general. You can follow him on Twitter at BlakeRutherford. His column appears every other Wednesday in the weekly Government & Politics e-newsletter. You can subscribe for free here.)

 

 

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