Arkansas Hospitals Fear Changes in Medicaid, Arkansas Works

Bo Ryall, president and CEO of the Arkansas Hospital Association
Bo Ryall, president and CEO of the Arkansas Hospital Association (Karen E. Segrave)

As the fight over health care continues in Congress, Arkansas hospital executives are worried about changes being made to Arkansas’ Medicaid expansion program known as Arkansas Works, which has saved hospitals $150 million annually in uncompensated care.

The modifications call for capping the eligibility at 100 percent of the federal poverty level, down from 138 percent, beginning Jan. 1. That means that of the 315,000 people on Arkansas Works, about 60,000 who earn more than $11,880 for an individual or $24,300 for a family of four will be removed from the program. The caps had been $16,400 and $33,600.

“They would hopefully become eligible for either employer-sponsored insurance, or they would be encouraged to move to the federal [health insurance] marketplaces,” said Brandi Hinkle, a spokeswoman for the Arkansas Department of Human Services.

Bo Ryall, the president and CEO of the Arkansas Hospital Association, expects the changes to Arkansas Works to end coverage for a “significant number of this population,” according to his June 15 letter to the Arkansas Department of Human Services, which was taking comments on the proposed changes. The U.S. Department of Health & Human Services’ Centers for Medicare & Medicaid Services has to approve changes to the Arkansas Works program. Hinkle said DHS planned to submit the proposed changes to CMS on June 30. She said DHS expects an approval decision in a few weeks.

Hospital executives are “certainly concerned that there will be a low transfer of those people from the Arkansas Works program over to the marketplace plans,” Ryall told Arkansas Business last week. “Those people then would become uninsured and end up back as uncompensated care for hospitals.”

He said in his letter that DHS has estimated that uncompensated care could rise by $5 million to $28 million next year, and by 2020 it could be up by as much as $11 million to $54.5 million.

Gov. Asa Hutchinson said in a statement to Arkansas Business that the reform was necessary for the “long-term success of the enhanced health care coverage.”

In addition to the changes in financial eligibility, Arkansas Works will require some people to work to keep their benefits. “So we’ve got concern not only for the 60,000, but we could be looking at another group of people with the work requirement that are being thrown off of coverage,” Ryall said.

The federal government paid 100 percent of the cost for the expanded Medicaid coverage through 2016. This fiscal year, however, the state will be responsible for about 6 percent, or some $50 million of the cost. By 2020, the state will have to pay 10 percent.

“The potential of future limits on federal funding underscores the need for cost-saving measures and reform in Arkansas,” Hutchinson said. “The status quo is untenable, and reforms are necessary to ensure Arkansas Works is successful for future generations of Arkansans.”

The Arkansas Works adjustment is expected to save Arkansas between $66.6 million and $93.4 million between January 2018 and the end of the 2021 fiscal year.

It’s unclear how many employers will offer health insurance to their employees who now will need it. The vast majority of the small businesses in Arkansas don’t know the changes to Arkansas Works are coming, said Sylvester Smith, the Arkansas director of the National Federation of Independent Business.

The NFIB is working to educate its 4,100 small-business members in the state, he said. “What we’re hearing is that they’re optimistic that there’s not any new mandate that’s placed upon them,” Smith said. “But those who can afford to provide the coverage to their employees will attempt to do so.”

Meanwhile, the uncertainty surrounding the Affordable Care Act, also known as Obamacare, is also making it difficult for Arkansas hospitals to plan for capital projects and expansions, said Brad Parsons, the CEO of NEA Baptist Health System in Jonesboro.

The U.S. Senate has released its bill to repeal and replace the Affordable Care Act, but Senate Republican Leader Mitch McConnell, R-Ky., fearing the legislation didn’t have enough support to pass, delayed the vote until this week. Under the Senate version of the bill, the Congressional Budget Office estimated that 22 million Americans would lose health insurance by 2026.

Parsons said when people don’t have health insurance and become ill, they wind up in the emergency room, where hospitals are required to treat them. “We treat them in the highest-cost setting that we have,” Parsons said. “That doesn’t make sense, does it?”

Arkansas’ Unique Approach
The ACA, President Barack Obama’s signature legislation, became law in 2010. Beginning in January 2014, the ACA’s centerpiece — known as the “individual mandate” — required Americans to have health insurance or face a penalty, but it also offered financial assistance in the form of tax credits for those who couldn’t afford it on their own.

The individual mandate survived a challenge at the U.S. Supreme Court, but the ruling gave states the option of refusing to expand Medicaid, mainly with federal dollars, to households with incomes just above the poverty line — the working poor who earn too much for traditional Medicaid but too little to afford health insurance.

Nineteen states rejected the Medicaid expansion. Arkansas, however, accepted the federal money and developed a unique approach that used the federal dollars to buy private insurance from the exchanges for eligible Arkansans rather than covering them through the traditional state-run Medicaid program. This plan, known first as the “private option,” has been since tweaked and renamed Arkansas Works by Hutchinson.

Ryall said in his letter to DHS that what’s now known as Arkansas Works has been “instrumental in reducing the state’s uninsured rate and has helped Arkansas hospitals to retain their ability to serve patients throughout our state.”

He said that Arkansas’ 100 or so hospitals have seen a decrease of about $150 million a year in uncompensated care. “While this decrease has certainly not eliminated uncompensated care, the reduction has stabilized the financial situation for many of the state’s hospitals,” he said.

‘We Are the Safety Net’
Ouachita County, with a population of about 25,000, is projected to see 558 people moved off of Arkansas Works. These people will be expected to secure insurance through their employer or the federal marketplace.

That concerns Peggy Abbott, the president and CEO of the Ouachita County Medical Center in Camden. “But there’s no guarantee that they will,” she said. “In a rural setting, we are the safety net.”

She said the hospital is preparing for a potential wave of newly uninsured patients, which could increase the hospital’s uncompensated care by as much as $2 million.

“It’s a financial hit to us to do that,” Abbott said. “We’re just very dismayed at some of the changes that are taking place, but we’re bracing up to survive.”

In September, the Medical Center opened an urgent care clinic in an attempt to reduce costs by keeping patients out of the emergency room, she said. It also operates a clinic in Stephens, a home health agency and a hospice. Abbott said the leadership team of the hospital is constantly brainstorming for ways to save money if changes are made to the ACA or Senate Republicans’ version of a health care bill passes.

“How do we scale back?” Abbott said. “The one thing that we always say is to protect … the core business, which is the general, acute-care facility.”

Still, the uncertainty surrounding health care reform makes planning stressful.

“For a few years now, it’s been a challenge to do long-range strategic planning that in my early days in health care was a given,” Abbott said. “We had a three-year range, a five-year range and even beyond. And that has … been thrown away because we can’t.”

As it stands, the 98-bed hospital has a slim margin. For its fiscal year that ended Sept. 30, 2015, the most recent number available to Arkansas Business, it had a net income of $55,000 on net patient revenue of $31 million. “Rural hospitals are struggling for survival as it is,” Abbott said. “We have very meager operational margins. Any hit to it is a chink in the armor.”