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Arkansas is currently trying to pursue a novel path for expanding Medicaid under the Affordable Care Act. They want to take the money and instead use it to get its population to buy private insurance on the new Obamacare exchange. It has been dubbed the “Private option.”
The one big problem with this plan is that private insurance is significantly more expensive than public insurance programs such as Medicare and Medicaid. This private option could be as much as 50 percent more expensive, but the Arkansas Department of Human Services released an analysis claiming the added cost would be much lower. They claim it may only cost 15 percent more or possibly less. One problem is their analysis seems based on some dubious and contradicting logic.
They start by claiming that adding more people to the exchange would increase the market power of the pool and allow it to negotiate lower prices. From the analysis:
It is likely that introducing 250,000 low-income adults into the private market through the insurance exchange will increase competition among carriers and generate some price pressure on providers, since they would then be compensated at competitive rates for all clients. This price pressure is estimated to result in a 5% reduction in private reimbursement rates in the exchange.
There is basically no real world evidence to justify this case. Insurance exchanges that have been tried in the United States have mostly been cost control failures.
What is more important, though, is that the logic of this section seems to be directly contradicted on the very next page. They claim adding more people to the current Medicaid pool would actually force Medicaid to increase the amount it pays to providers.
Arkansas’ existing Medicaid program appears to provide sufficient access, but adding 250,000 participants would require significant new commitments by providers to meet the increased demand for medical services.
How much might the Federal government need to pay providers to secure access for this new population? The best comparison point might be the rates that would be paid in a competitive market for services to a low-income population, and this is exactly what those providers would get paid under Arkansas’ emerging plan.
So the Arkansas DHS is claiming that larger purchasers are better able to negotiate lower prices, but somehow this don’t apply to Medicaid. Giving Medicaid more market power would make it less effective at negotiating prices.
Photo by TimmyGUNZ under Creative Commons license.
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Sound like normal republican thinking… get your citizens to put money in the pockets of some republican owned business….
Personally, I am not sure that will go over so well because in the past Arkansas was actually a fairly popular retirement location.
Obarry care working just as intended. Pretend to do something for the people, and as with everything concerning this Prez, its always a lie wrapped in marketing.
As I said in commenting on the Arkansas governor’s obtaining agreement for this step from the Obama administration (in one of fatster’s roundups a couple of weeks ago or so), the point is that he can sell this plan as avoiding an “entitlement,” a hated concept. Logic has nothing to do with it.
Insurance companies have clearly been planning on the Medicaid expansion as far as positioning themselves for privatized HMO managed care plans.
I wonder if this Arkansas plan was on their radar as well. It seems to present some new issues.
Will insurance companies make more money from Medicaid from insurance purchased on the exchanges, or from privatized managed care HMO’s?
Will Medicaid-substitute insurance policies need to conform to the 80-85% medical loss ratio requirement, unlike privatized Medicaid HMO’s for which the MLR is left up to the states, most of which don’t impose any?
Will Medicaid negotiate prescription drug policies for people insured on the exchanges, as it does for beneficiaries of Medicaid or privatized HMO Medicaid now, a feature not available to the other people insured on the exchanges?
The ACA allows increased opportunities to transfer dual-eligibles from Medicare to Medicaid. Will they be transferred from Medicare to privatized Medicaid HMO’s or privatized Medicaid-substitute insurance policies on the exchanges?
Or, to put the questions in more general terms:
Which will be the path to the total privatization of Medicaid, managed care HMO’s or individual insurance policies?
ACA – “starter house” for total privatization.
Great comment, miI; you show exactly the proper focus of discussion.
I can’t tell you how much that name pisses me off. Tell me that’s not a deliberate rub of Progressive noses in the “Public Option” betrayal.