The Leaflet: What States Can Learn from Arkansas’ Medicaid Reforms

Published May 26, 2017

To date, 32 states have expanded their Medicaid programs to cover those with incomes up to 138 percent of the federal poverty level (FPL), a result of the Medicaid expansion policies implemented by the much-debated Affordable Care Act (ACA). While many states controlled by Democrats simply expanded their existing programs, many Republican-controlled states were much slower to act, as they looked for ways to reform in a way that might appeal to their more-conservative electorates. The most notable example of this is Arkansas, which has been held up by many Medicaid-expansion proponents as a Republican model for expansion.

According to a Research & Commentary by Heartland Senior Policy Analyst Matthew Glans, “Arkansas is the originator of the private-option model that many states used to expand their Medicaid programs. With its Medicaid expansion failing to contain rapidly increasing costs, Arkansas will soon become the first state to enact reforms significantly scaling back Medicaid expansion under the ACA.”

The Arkansas “premium assistance” model passed in 2013, eventually adding 250,000 recipients to its Medicaid rolls. The state’s program enabled the newly eligible to purchase subsidized insurance on the Obamacare health insurance exchange. However, the ballooning costs associated with the Arkansas model led lawmakers in the state to look for ways of reining the program back in.

A report from the U.S. Department of Health and Human Services (HHS) found the average cost of ACA’s Medicaid expansion enrollees was nearly 50 percent higher in fiscal year 2015 than previously projected. In 2015, Medicaid expansion enrollees cost an average of $6,366, not the projected $4,281.

According to Americans for Prosperity, a vocal proponent of the recently approved reforms to the model, “Arkansas will become the first state to enact reforms significantly scaling back Medicaid expansion under Obamacare. The reforms recently passed by state lawmakers decrease eligibility for the program from 138 percent of the federal poverty level (FPL) down to 100 percent FPL. This reform is estimated to reduce state Medicaid rolls by 60,000 people, or approximately 20 percent of Medicaid expansion enrollment in the state – which has ballooned far beyond what the state ever projected and subsequently added tens of millions of dollars in cost.”

The new law also mandates the state seek a waiver from the federal government to allow Arkansas to impose work requirements for able-bodied individuals seeking to enroll. According to Glans, “The new work requirements that would be included with the rollback use methods that proved to be very effective when they were included in the welfare reforms of the 1990s; in a study examining poverty after the 1990’s welfare reforms, the Manhattan Institute found the inclusion of work requirements led to substantial reductions in poverty nationwide.”

With the fate of the ACA still in doubt and the increased costs associated with Medicaid expansion (and declining federal match), more expansion states will likely have to apply for waivers to cut costs.

States that have not yet expanded Medicaid would be best served to apply for waivers and offer solutions to help better serve existing enrollees before even considering expansion. Expansion states should look to Arkansas’ new reforms as a warning, and possibly a model, for fixing many of the problems created by expansion.

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