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'Arkansas Solution' Could Be Game Changer for Health Law, Top Medicaid Lobbyist Says

By John Reichard, CQ HealthBeat Editor

April 5, 2013 -- An Obama administration decision to take a highly flexible approach to what Medicaid wonks call "premium assistance" could tip the balance toward widespread expansion by the states of their Medicaid programs, a top state lobbyist says.

Premium assistance refers to using Medicaid money to help recipients buy private coverage. If the administration allows that to happen, it could be a game changer, says the lobbyist, Matt Salo. He's the executive director of the National Association of Medicaid Directors.

Salo estimates that only about half of the states are on a path to expand by Jan. 1 their Medicaid programs using the federal funds provided under the health law (PL 111-148, PL 111-152). But the total could climb a lot depending on how the Department of Health and Human Services responds to a premium assistance proposal known as the Arkansas solution, Salo said in an interview.

"I think you're talking 35, 40-plus by Jan. 1 or soon thereafter," he said. And if the total climbs that high, the remaining states could also get on board within a few years, he adds.

The appeal of the approach to states hostile to the health care overhaul law is that premium assistance lets them take advantage of the billions of federal dollars provided under the health care law without appearing to expand a government program — Medicaid. Rather, it looks like an expansion of private coverage. "You're getting people enrolled in private plans," Salo said.

Arkansas is leading the charge on this. Rather than putting into the program those who would be eligible for Medicaid under the health care law expansion, Arkansas officials want to use the expansion funds to permit the newly eligible to buy coverage on the new insurance exchange created by the overhaul.

Salo says it's not at all clear that HHS will show the flexibility needed to get most of the states on board. On the one hand, it wants to accommodate states in order to widen the expansion. On the other, it doesn't want to compromise deeply held beliefs in the administration about how Medicaid benefits must be structured.

But it's clear that the administration sees the Arkansas approach as possibly a major opportunity to turn around states that are hostile to the health care law. And if it entails much heavier use of exchanges in those states, that would be a big plus for those new marketplaces, which are viewed with suspicion in parts of the country opposed to expanding coverage through the government.

Federal officials seem eager to make the Arkansas approach work. HHS Office of Health Reform Director Michael Hash recently told reporters that the administration is waiting eagerly for a formal proposal from the state. And in an April 1 letter to Arkansas Gov. Mike Beebe, HHS Secretary Kathleen Sebelius offered assurances "that we will work with you on this innovative approach." Sebelius also has had conversations in recent days with Pennsylvania Gov. Tom Corbett and Tennessee Gov. Bill Haslam. Salo adds that there are "nonstop" negotiations occurring behind the scenes involving officials from the Centers for Medicare and Medicaid Services and Arkansas, as well as with Ohio officials, who also are exploring a similar approach.

In her letter, Sebelius also noted the March 29 release of a Medicaid guidance document that "I hope will help inform states like Arkansas as you work to finalize your plan." But Salo also said the new information is an attempt to set limits on what the states can do.

A frequently asked questions document released with the guidance says: "You will have to do wraparound benefits" and "you will have to do beneficiary protection on cost-sharing." Salo said. In other words, coverage offered in exchanges to the Medicaid expansion population would have to meet certain Medicaid-specific criteria.

States led by Republican governors already are chafing at Medicaid regulations, saying the regulations explode their state budgets and should be replaced with a system of block grants.

"If CMS weren't quite so firm on those stances, you could get Tennessee to say yes right away," Salo said. "Yes, they want to make this work," he said of CMS officials. "But they also don't want to give away too much of the farm." The guidance material is "an attempt to lay out some parameters, to sort of fence in the possibilities. It's a way of saying 'we're committed to working on this but hey, Texas, we're not going to let you just do whatever you want'" with the federal Medicaid money.

Waiting for 'White Smoke'

"The folks in Arkansas and Ohio are working nonstop with CMS staff to figure out how to make this work," Salo said. "They are both actively figuring out how to make this work from a cost effectiveness standpoint, from an administrative simplification standpoint, from an operational standpoint." At some point, "there will be white smoke or there will be black smoke and we'll either have a Pope or not," he quipped. If there is an agreement with either or both of those states, that will produce a template that virtually every state not now committed to an expansion will take a look at. States would say, "'OK, I like that and I want to do it,' or 'I like most of that, can I tweak that a little bit here?'" Salo said.

But if the administration sees an opening through the Arkansas solution to tip the balance toward widespread adoption of the law, its opponents appear to be on to that fact. They may be starting to mobilize against the Arkansas solution.

The Tea Party-affiliated group Americans for Prosperity on its website describes the Arkansas plan as a "scheme to expand Medicaid."

"It doesn't matter if Medicaid is expanded under its traditional program or through a premium support model; 225,000 new Arkansans will be dependent on government for their health insurance," the group says. "Adding people through the Arkansas model will inflate the already high costs of Medicaid for taxpayers." The group warns that "this model is spreading like wildfire. Numerous states including Ohio, Tennessee, and Florida are discussing a similar expansion with HHS. What is bad for Arkansas is bad for these states as well."

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