Research & Commentary: Arkansas Private Option Should Serve as Warning to Other States

Published November 11, 2015

In several states that have chosen not to expand their Medicaid programs under the Patient Protection and Affordable Care Act (ACA, also known as Obamacare), lawmakers are offering proposals to expand Medicaid under new plans designed to improve the flawed program. One of the most hotly debated examples of this is the Arkansas private option.

Under this premium assistance model, an estimated 250,000 new enrollees would be added to Arkansas’ Medicaid rolls and would purchase private insurance from the state’s Obamacare health insurance exchange, receiving a premium support payment to purchase the insurance. Despite the private-market veneer, the Arkansas program still represents an expansion of a failed Medicaid system, where multiple aspects of the insurance plan are dictated by the federal government and the beneficial elements of real market competition are lost.

According to the Washington Post, the initial projections by an actuary firm hired by Arkansas to review the plan found the premium support model would cost federal taxpayers $18.9 billion over the next ten years and an additional $1.59 billion from Arkansas taxpayers. Although the exact costs are not yet known, spending on Medicaid has skyrocketed since the implementation of Obamacare. Peter Ferrara, a senior fellow of The Heartland Institute, warns total future costs to state governments are estimated to exceed the funds provided by the national government, with the shortfall reaching as much as 66 percent of state expenditures. States will find the situation unsustainable.

As of May 2015, Medicaid in Arkansas covered 832,510 people, according to A report released by The Stephen Group in October 2015 found substantial waste and fraud in the state’s Medicaid expansion. For example, more than 42,891 individuals with out-of-state addresses were enrolled in the program – 20,110 of them in the Private Option. In addition, 6,753 enrollees, including 3,210 Private Option recipients, had no record at all proving state residency. The Stephen Group also found the state’s Medicaid program enrolled 367 deceased individuals (128 of them Private Option recipients); 427 individuals enrolled in dual programs; and 1,198 incarcerated recipients who already receive health care in jail or prison. The report found 12,622 Medicaid enrollees in Arkansas own property valued in excess of $100,000.

The simple answer to the fraud and waste is to end the Medicaid expansion. However, in an August 2015 report, The Stephen Group found ending Medicaid expansion and reverting to traditional Medicaid could cost the state $438 million between 2017 and 2021. This finding reinforces the idea states should not expand Medicaid in the first place, because when expansion programs fail and lose money they cost even more to roll back.

Medicaid expansion is an expensive endeavor that research shows fails to provide better or more affordable health care. Instead of expanding a flawed model that is very costly to taxpayers, delivers subpar health care, and shifts more power to the federal government, state lawmakers should instead consider reform options like those piloted in Florida, which reduce costs and offer better care to patients in the existing system.

The following articles examine Medicaid expansion and the Arkansas model from multiple perspectives.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.

Research & Commentary: States Should Innovate, Not Expand Medicaid  
Matthew Glans of The Heartland Institute discusses how expanding Medicaid can cause problems that extend beyond state budgets and the health care industry, and he notes better options are available: “It is important to remember government spending creates little or no income or economic growth; it is merely the redistribution of tax dollars taken from the pockets of taxpayers.” 

The Empty Promises of Arkansas’ Medicaid Private Option
The Foundation for Government Accountability examines the empty promises of Arkansas’ Medicaid Private Option—using supporters’ direct quotes from sources including media interviews, floor speeches, and social media posts—and rebuts them point by point.

How Medicaid Expansion (and the “Private Option”) Will Lock its Clients into Poverty
Dan Greenberg of the Advance Arkansas Institute argues legislators need to consider the potential economic problems from Medicaid expansion—slowing economic growth and trapping clients into low-wage jobs.

Think Again: The Arkansas Plan for Medicaid Is Still a Bad Idea
In response to proponents’ attempts to keep the Obamacare Medicaid expansion alive by suggesting states pursue an “Arkansas model,” Nina Owcharenko of The Heritage Foundation provides several reasons the Arkansas model is a bad idea.

The Private Option: Medicaid Expansion by Another Name
Americans for Prosperity’s state policy manager, Nicole Kaeding, breaks down what could be in store for Arkansas after the vote to expand Medicaid in the state.

Why States Should Not Expand Medicaid
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington greater control over spending to better fit coverage expansion with their states’ needs, resources, and budgets.

Policy Tip Sheet: Medicaid Expansion
Kendall Antekeier of The Heartland Institute explains why states should avoid Medicaid expansion and instead reform their fiscally unsustainable programs in ways that will offer better care at lower costs to taxpayers.

Obama and the Medicaid Expansion: How Does Your State Fare?
The Heritage Foundation documents the future cost implications of Medicaid expansion on a state-by-state basis.

Research & Commentary: The Medicaid “Cure”
The Heartland Institute’s Kendall Antekeier examines the Medicaid Cure, a pilot program established in five large Florida counties by Gov. Jeb Bush, a premium support model in which 290,000 Medicaid recipients are given a range of premiums and plans from which to choose.

A Medicaid Cure: Florida’s Medicaid Reform Pilot
The Foundation for Governmental Accountability gives insight into the Medicaid Cure’s success, stating, “When the patient is the priority, government and HMO bureaucrats are finally held accountable. Costs flatten and patient health and satisfaction improves.”


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or the Heartland Institute Web site, contact Heartland Institute Government Relations Director John Nothdurft at [email protected] or 312/377-4000.