The Leaflet – Is Arkansas’ “Private Option” Plan a Game Changer?

Published April 18, 2013

Yesterday, the Arkansas legislature approved a Medicaid waiver request to allow for a “private option” version of expansion. The state must now wait for the Centers for Medicare and Medicaid Services (CMS) to accept the plan or it will be back to the drawing board. You can read the actual legislation here.

Dan Greenberg, president of the Advance Arkansas Institute, points out, “states which direct Medicaid funds through private insurers will not be able to resort to any more flexibility or experimentation than Medicaid already provides. This means, among other things, that the virtues of competition in coverage that the advocates of the private option had depended on will not be permitted by the federal government. In other words, any expansion – whether you call it the private option or not – simply gets you a bigger version of the same old dysfunctional Medicaid program.”

With so many states still considering what, if anything, to do with Medicaid expansion, other states will be looking to learn from the Arkansas experience once the dust settles. Some health care experts are already opining on its significance or lack thereof.

According to Benjamin Domenech, a Heartland Institute research fellow and editor of The Transom, “At the end of the day, this is looking less like a game changer and more like a potentially cautionary tale about the vagaries of Medicaid expansion. Arkansas will still be dealing with a Medicaid program where everything is dictated by the federal government, on cost-sharing and everything else. It won’t have any control over the program, and it will push the 100-138 FPL population onto Medicaid instead of the exchanges. And here’s the real kicker: when the waiver expires, based on these extremely optimistic assumptions, HHS has already laid the groundwork for denying waiver renewal.”

Eighteen states have decided not to move forward with expanding Medicaid or are leaning in that direction, saying Medicaid is a failed entitlement program that should not be expanded but reformed. Expansion will likely mean increased costs and higher taxes in future years, and the expansion will be nearly impossible to roll back once enacted.

This week’s edition of The Leaflet features research and commentary addressing Stockton and municipal bankruptcies, tobacco-funded universal pre-K, Colorado renewable mandate increases, Vermont tax hikes, and spectrum auctions.


John Nothdurft
Director of Government Relations
The Heartland Institute
The Back-Room Medicaid Debate
Health Care
This op-ed by Heartland Research Fellow Benjamin Domenech, published in the Orange County Register, discusses “The Back-Room Medicaid Debate.”

    “States across the country are making a fateful decision that will determine the future tax burden on their citizens, the size of the largest line item in virtually every state’s budget, and the nature of the nation’s most significant expansion in entitlements since the Great Society. Medicaid is the nation’s worst entitlement program (which is saying a lot), and expanding it will cost each state’s taxpayers billions down the road—because the federal government is offering to pay for the expansion initially but will soon require the states to kick in as well.

    Despite the importance of this decision, most of the public has been largely cut out of the question of whether states should expand Medicaid under President Barack Obama’s health care law. Instead the debate is dominated by those who would benefit from the expansion: vast medical providers eager for access to more taxpayer money and corporations that would like to shift employee health care costs to the taxpayers.

    These groups are working the back rooms, telling legislators all about the short-term political benefits of expansion while ignoring the long-term costs. They promise a wonderful feast where the bill never comes due.

    A few smart legislators are resisting the pressure and choosing not to expand the system. They understand the plan is effectively a delayed tax increase that will throw people into a government-run health care system with outcomes so awful that in many cases people are statistically better off being uninsured. Cramming more people into Medicaid will lead to even lower quality care and even worse access problems, hurting the very people it’s supposed to help …”

You can read the rest of this op-ed here.
Research & Commentary: Stockton, California and Municipal Bankruptcies
Finance, Insurance, and Real Estate
According to Governing magazine, there were 28 public bankruptcies in 2011 and 2012. Although that number fell short of many experts’ predictions, it still represents a significant increase in defaults.

Of the dozens of cities considering bankruptcy, Stockton, California is the largest and has received the most attention. A recent court decision should allow Stockton to continue its path through bankruptcy court, which some experts believe could lead to more cities moving in this direction to manage their debt.

In this Research & Commentary, Senior Policy Analyst Matthew Glans examines the growing number of municipal bankruptcies and the issues behind the trend. He contends cities like Stockton have relied on property tax revenue as an endless cash cow for far too long. Instead of making excessive promises to employees and building projects they cannot afford, cities should make long-term plans that embrace a competitive tax structure that provides more reliable revenue.
Research & Commentary: President Obama’s Universal Pre-K Proposal
Included in President Barack Obama’s 2014 budget is a proposal to expand federally funded pre-K, to be paid for by raising the federal cigarette tax from $1.01 per pack to $1.95. In this Research & Commentary, Director of Government Relations John Nothdurft and Research Fellow Joy Pullmann describe why this is a bad idea from both an education and a tax perspective.

They write, “Once this unreliable tax revenue stream dries up, advocates of the program undoubtedly will press for more tax hikes to fund the expanded pre-K program of dubious benefit.”
Research & Commentary: Colorado Renewable Portfolio Standard
Colorado legislators are bucking the national trend and considering a bill that would significantly boost the state’s renewable portfolio standard (RPS). As always, supporters claim the measure will reduce air pollution and create jobs.

In this Research & Commentary, Policy Analyst Taylor Smith counters by saying the RPS actually kills jobs by raising energy costs. While the RPS may have a small impact on CO2 emissions, it will actually significantly increase other air pollutants.
Research & Commentary: Vermont Tax Hikes
Budget & Tax
The Vermont Legislature is currently considering a vast new array of tax changes and increases that could have a serious effect on the state’s economy. The proposals under H 528, which has passed through the Vermont House of Representatives, would take money out of the pockets of citizens through income tax hikes for higher-income earners and new taxes that affect all consumers of such items as candy, vending machine snacks, heating oil, and tobacco products. According to the Vermont Legislative Joint Fiscal Office’s fiscal note, the total estimated cost to Vermont taxpayers will be $27 million in 2014 and $32.3 million in 2015.

In this Research & Commentary, Glans examines each of the proposed tax changes and argues that instead of increasing taxes on higher-income-earners, a source of revenue that fluctuates greatly with the changing economy, Vermont lawmakers should develop policies that cut both spending and tax rates.
Obama Again Picking Private-Sector Losers at the Expense of Winners

InfoTech & Telecom
Late last week the Justice Department strongly suggested the Federal Communications Commission (FCC) implement rules to ensure that all companies receive their “fair share” of wireless spectrum in the upcoming spectrum auction.

“The Department concludes that rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum could improve the competitive dynamic among nationwide carriers and benefit consumers.”

In this article from The Heartland Institute’s blog, Seton Motley, president of Less Government, a DC-based non-profit organization dedicated to reducing the power of government and protecting the First Amendment, argues that by interfering in the competitive auction of space on the wireless spectrum, the government is picking winners and losers and harming the growth of the digital market.

“The Obama Justice Department wants the Obama FCC to rig the spectrum auction. So that it’s not actually an auction – it’s a quota set-aside program. Affirmative Action for wireless companies.

“Where people who don’t make the highest bids – win the bids anyway. Or where the FCC forbids some willing participants from participating.

“It’s not picking winners and losers – it’s picking losers at the expense of winners.”