“Medicaid Expansion” Via the Exchanges

In the wake of the deal whereby Rick Scott agreed to the Affordable Care Act’s Medicaid expansion in exchange for a waiver allowing him to contract with private managed care companies to handle the state’s entire Medicaid population, we learn today that Arkansas will join the ranks of the “expanded” via a different but more ground-breaking deal whereby the new Medicaid beneficiaries would actually be covered through the new private health insurance exchanges created by Obamacare.

The details are still hazy; it’s not clear, for example, whether the new “Medicaid” folk in Arkansas will be entitled to exactly the same benefits as those in traditional Medicaid; and/or will be subject to higher copays and deductibles. What is clear is that this was the price the Republicans who now control the Arkansas legislature exacted from Democratic Gov. Mike Beebe to go along with the expansion, even though it might increase per-beneficiary costs. Check out this explanation from the Arkansas Times‘ David Ramsey:

Such a deal would potentially be a windfall for insurance companies, as well as hospitals, who would likely see higher reimbursements from private insurance on the exchange….

As for costs, buying private insurance for citizens is likely more expensive than providing Medicaid. That almost certainly means that this deal will have a higher price tag for the feds. And it could mean higher costs for Arkansas once the state has to start chipping in….

“My main objective is to make this legislature as comfortable as I can make them,” [Gov. Beebe] said. “With a three fourths vote requirement in both houses, that’s a steep, steep burden….If the majority would prefer to go this way to get this done, I’m happy with that. If they want to go the other way, I live with that as well. The cost to the taxpayer for the first three years in the state of Arkansas is going to be the same.”

Beebe said that for some legislators, subsidizing folks to buy private insurance was preferable to directly covering people through a government program for “philosophical” reasons.

So let’s be clear: using the exchanges will be more expensive, and perhaps less generous to beneficiaries, than traditional Medicaid, but because Republicans prefer private insurers for “philosophical reasons,” that’s how it’s going down (this is also the same approach Ohio Gov. John Kasich is pursuing in conditionally approving the Medicaid expansion, though HHS has yet to rule on his waiver request).

This draws attention to two pretty important national issues: the first is the persistent gap between the faith conservatives place in the “efficiency” of private-sector health insurance and all the available evidence. And the second is the emerging long-term conservative strategy of undermining Obamacare by limiting its “public” elements as much as possible and then chipping away at the regulations that make it available and the subsidies that make it affordable. This is precisely what Douglas Holtz-Eakin and Avik Roy called for in their much-discussed recent op-ed on how conservatives should adjust to the enactment of Obamacare.

So while no one can blame Beebe for playing the hand that was dealt to him, I’d say the Arkansas “Medicaid expansion” may not be worth more than two cheers.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.