Arkansas’ Latest Idea: Obamacare Welfare For People Who Already Have Insurance

Nicholas  Horton
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Posted: Apr 05, 2016 10:30 PM
Arkansas’ Latest Idea: Obamacare Welfare For People Who Already Have Insurance

Arkansas’ Obamacare expansion, commonly known as the “Private Option,” has been a nightmare. Costs have run significantly over budget and the truly needy are being pushed to the back of the line. The Government Accountability Office reported that Arkansas’ approach was simply a more expensive way to expand Obamacare. And, surprise, the promised economic stimulus from expansion never materialized.

The program has proven wildly unaffordable for taxpayers and has become a political landmine for state legislators. Facing mounting cost overruns and serious questions about long-term sustainability, the legislature and governor agreed last year to terminate the expansion at the end of 2016.

But now Governor Asa Hutchinson has decided that the state desperately needs to keep Obamacare expansion and has called a special session that will begin April 6th to extend it. Hutchinson’s plan will also make cosmetic tweaks to the expansion and give the program a new, Orwellian name: “Arkansas Works.”

One of the key bugs, errr, “features” of this new plan is to begin utilizing employer-sponsored health insurance plans for Medicaid expansion enrollees. But there are several elements of this proposal that are cause for serious concern.

Enrollees Who Move To ESI Would Still Be Medicaid Enrollees

Under “Arkansas Works,” able-bodied adults with access to employer-sponsored insurance would be required to accept that coverage if their employer chooses to participate and if the coverage is deemed “cost-effective” when compared to the health plans offered through the “Private Option.” But despite implications by supporters that these individuals would leave Medicaid, nothing could be further from the truth.

Under this plan, these able-bodied adults are still considered Medicaid enrollees and take their Obamacare expansion dollars with them. Through the Medicaid program, taxpayers will pay their premiums, deductibles, and any copays or coinsurance above the nominal amounts allowed under traditional Medicaid.

Enrollees will also still receive all Obamacare-mandated benefits. And if their employer’s plan doesn’t cover a particular Medicaid benefit – such as non-emergency transportation – those benefits must be provided to enrollees as wrap-around coverage, courtesy of taxpayers.

Expansion Enrollees Would Get Cash From Taxpayers, Opening Door to Fraud

There’s nothing particularly innovative about Arkansas’ latest proposal. Congress authorized states to deliver Medicaid benefits through employer-sponsored plans more than 25 years ago and most states already offer similar programs for traditional Medicaid enrollees. The difference is that Gov. Hutchinson wants to expand this approach to able-bodied adults made eligible by Obamacare.

The Medicaid program can pay premiums, deductibles, and copays in three primary ways –making payments to insurers and providers on behalf of enrollees, making payments to employers and providers, or reimbursing enrollees directly. In each case, taxpayers will be liable for enrollees’ share of those costs.

Some lawmakers are worried that this new proposal is ripe for waste, fraud, and abuse of taxpayer resources. Based on the experiences of other states, they’re right to be concerned. Nebraska auditors recently investigated their state’s premium assistance model by reviewing more than a quarter of all program expenditures. Auditors discovered that the state lacked proper documentation for every single reviewed case file and more than 75 percent of the audited cases had incorrect payments.

“Arkansas Works” Could Increase Adult Enrollment By Nearly 80,000

The plan is being sold as a way to move more able-bodied adults from Medicaid to employer-sponsored plans. In fact, the Hutchinson administration claims it can shift up to $29 million per year onto employers by having them pay a portion of Medicaid expansion enrollees’ costs.

But “Arkansas Works” will likely add even more able-bodied adults to welfare over the coming years – because even those who already have private insurance will qualify for this cash handout.

According to the most recently available data, there are nearly 80,000 able-bodied adults in Arkansas who earn less than 138 percent of the federal poverty line with employer-sponsored insurance. Under “Arkansas Works,” all of these adults would now qualify for taxpayer-funded welfare checks to pay their share of costs – costs they are currently paying themselves.

A new class of able-bodied adults who already have private insurance will be able to keep their existing insurance, but simply shift the costs of their premiums and out-of-pocket expenses to taxpayers.

Altogether, this tweak that’s supposed to save taxpayers’ money could add up to $500 million per year in new costs, with state taxpayers picking up five to ten percent of those costs (assuming Congress doesn’t repeal expansion funding).

And every dollar spent on those who already have private insurance is a dollar that can’t be used on the truly needy, including nearly 3,000 Arkansans with developmental disabilities who have spent years on waiting lists for needed services.

Arkansas has already enrolled more able-bodied adults than the state said would ever even be eligible. “Arkansas Works” would make this enrollment explosion even worse.

Arkansas’ Plan Could Put 23,000 Kids With Private Coverage On Welfare

And the cost spikes may not end there: if more able-bodied adults with employer-sponsored insurance sign up for “Arkansas Works,” their children may sign up for traditional Medicaid.

Federal regulations dictate that states cannot qualify for enhanced federal matching funds for parents on Medicaid unless their children are already covered by Medicaid or have proof of other coverage. The application process also collects information on all family members and encourages individuals to apply for Medicaid even if their children already have health insurance because they “could be eligible for lower cost or free coverage.”

According to the latest data, the 80,000 additional adults with employer-sponsored coverage who could be added to Medicaid as a result of “Arkansas Works” could bring up to 23,000 children with them.

But here’s the big problem: these 23,000 enrollees won’t come with enhanced matching funds. Obamacare only provides enhanced funding for able-bodied adults between the ages of 19 and 64.

So instead of receiving upwards of 90 percent funding from federal taxpayers for these enrollees, the state will only receive the traditional matching rate of 70 percent. Arkansas officials have yet to produce a fiscal note for these new costs or release a plan to pay for them. But based on 2015 expenditures data, adding 23,000 new kids could increase Medicaid spending by nearly $80 million per year, with the state covering nearly $24 million of those costs.

Arkansas Should Let Obamacare Expansion End

Current Arkansas law ends Obamacare expansion on December 31, 2016. If policymakers delay unwinding this disaster, they will burden taxpayers with even more unsustainable costs and will worsen the outlook for all truly needy Arkansans, including Arkansans like Skyler Overman who have been left behind.