Opponents of the private option really, really don’t like the policy, which uses Medicaid funds to purchase private health insurance plans for low-income Arkansans. But the arguments they’ve used to explain why often descend into a see-what-sticks approach that is factually inaccurate, deeply misleading, or self-contradictory.
Now that the private option is set to be debated all over again, we’ll be seeing another wave of these. Earlier this week, Rep. Joe Farrer penned a diatribe against the private option for Talk Business (Sen. Jonathan Dismang, meanwhile, made the case for the policy). Farrer will be familiar to readers of this blog, having been generous enough to do a Q&A with us late last year on the policy.
Let’s take a look at Farrer’s piece, titled “The Cruel Reality of the ‘Private’ Option”…
Arkansas is dependent on the young and healthy enrollees into the Obamacare health care exchanges. Just like nationally, Arkansas is having trouble getting people to enroll into the exchanges. Therefore, to improve the numbers, the Arkansas Insurance Department automatically enrolled SNAP (food stamp) welfare recipients into the private option, without verifying income of the people who are receiving this entitlement.
There’s a lot wrong here. First of all, the SNAP beneficiaries are, by definition, income-verified. That’s the whole point. DHS targeted individuals who the agency knew qualified for the private option based on existing records for the means-tested SNAP program (beneficiaries are required to report a change in economic circumstance and DHS re-verifies income on an annual basis).
Farrer’s statement that AID (actually it was DHS, not AID, but this piece was apparently not fact checked) “automatically enrolled” SNAP beneficiaries is wildly misleading, and is precisely the language always used by “private option” opponents to attempt to disparage the successful direct-mail outreach program conducted by DHS. Nobody was automatically enrolled, which DHS would have no authority to do. What happened was that DHS contacted eligible people and informed them of the new option for health coverage. These folks then had to mail a letter back to DHS affirmatively stating that they wished to enroll in the private option. It’s true that enrollees who didn’t choose a particular private plan had one assigned for them, but that’s hardly the picture Farrer is painting with talk of auto-enrollments to inflate the number of people who want to sign up for health care.
Farrer appears to be implying that there is something nefarious (“to improve the numbers”!) about a government agency identifying folks eligible by law for a service they desperately need and signing them up. That’s a logic that only makes sense if you simply don’t want low-income Arkansans to have access to services. (Worth noting that Farrer previously said that prior to the Affordable Care Act, “there was nobody complaining that they didn’t have health care.”)
One thing Farrer gets right: so far the state has had lagging enrollment in the federally facilitated healthcare exchange. But he elides the fact that this is a separate enrollment process and separate population than the private option. And in fact, while enrollments for non-private-option folks in the Marketplace are low, enrollments for the private option have been extremely strong. Only around 12,000 Arkansans had selected a plan through healthcare.gov as of the end of December. Meanwhile, around 90,000 people (through mid-January) have been determined eligible and will enroll in the “private option.” In other words, when Farrer writes “just like nationally…” he has it exactly wrong: unlike other states that have struggled with enrollment, Arkansas has the private option, which has been an enormous boon to the struggling marketplace. As Farrer notes, the state marketplace is “dependent on young and healthy enrollees” — so it’s a good thing that private option enrollees are dramatically younger than others on the marketplace so far, and there is reason to believe they lean healthier as well. In short, the marketplace might be in serious trouble without the private option, but is looking in pretty good shape with the policy in place. That’s good news for Arkansans shopping for health insurance, though admittedly it’s bad news if you’re mostly just rooting for the Obamacare exchange to fail.
Moving on. Farrer writes:
In an effort to mask the real cost of the private option, the legislature and governor tried “new math” by moving the sick and frail to original Medicaid. Arkansas currently spends $6 billion a year on Medicaid. The mathematicians in the legislature say this increase in cost is paid 100% by the federal government. This is true, but only for a short time. What they don’t tell you is that Arkansas picks up 30% of the $6 billion Medicaid budget which is $1.9 billion dollars. With the private option, Arkansas is adding 25,000-30,000 more people to traditional Medicaid. So this new population will add another half a billion dollars to the state’s budget. Whether it is federal tax dollars or Arkansas tax dollars, the private option is a huge increase in spending without any way to pay for it either in the state or federal budget.
I’m uncertain what “new math” is, but unfortunately Farrer’s math is based on inaccurate assumptions. Farrer projects that 25,000 to 30,000 people will be deemed medically frail and sent to traditional Medicaid. That estimate is probably too high, but let’s leave that aside. Farrer implies that these folks will be more costly to the state than private option enrollees who go to private plans because they will be covered by a 70-30 match rate from the feds (this is the match that the feds give for the existing Medicaid program, as opposed to the 100 percent match the feds give on the expansion population). This is wrong. The feds give the exact same contribution (100 percent for the first three years, eventually declining to 90 percent in 2020) for beneficiaries newly eligible via the expansion, whether they’re covered by private plans or are routed to traditional Medicaid. (Worth noting too that putting the medically frail in traditional Medicaid makes for a healthier pool on the marketplace, which could lead to cheaper premiums for anyone shopping for a plan on the individual market.)
It is true that people already eligible for Medicaid will be covered by a 70-30 match, but this would be the case with or without the private option. These “woodwork populations” (so called because they “come out of the woodwork” whenever there is a coverage expansion — advocates for the poor prefer “welcome mat population” because, well, they’re eligible and they ought to be covered, not demonized) have been signing up in droves even in states that did not expand Medicaid, because of attention around the healthcare law. The private option will actually save the state millions because some people who were already eligible pre-expansion will end up being covered by the private option instead, giving the state the higher match rate (for example, a low-income pregnant woman would qualify for Medicaid and the state would have to chip in 30 percent; if she instead is covered by the private option, the feds pick up more of the tab).
Proponents of the private option tell us that if the program fails, or if we decide we don’t like it after three years, it will just go away. But entitlements don’t go away and the governor’s office is already telling us the program can’t be stopped.
This is a confusing turn. Farrer says that the program can’t be stopped in an article arguing that the legislature should stop the private option. In fact, the legislature may well decide to in effect pull the plug during the fiscal session if they refuse to appropriate the funds for the policy. They’ll have a chance to do so again in future years. I can understand why opponents of the private option would have wanted to say “once you start, it’s impossible to stop” last spring, before the policy was enacted. But arguing that now, when stopping it is precisely what they are aiming to do, is surreal.
With the cost of the private option continually increasing, how will Arkansas pay for these increases? By raising taxes on working Arkansans or cutting spending on education?
Obviously the core of the debate is about long-term costs, but it seems worth noting that independent actuaries predicted that the state would save more than $600 million on net over the next 10 years via the private option, and that the policy’s costs thus far are in line with those actuarial predictions. The state’s Department of Finance and Administration recently testified that defunding the private option would blow an $89 million hole in the 2014-2015 budget. In other words, Farrer has it backwards. If Arkansas refuses this federal money and ends the private option, it will either have to raise taxes or cut spending to make up the loss.
Finally, a minor error: “After three years, Arkansas will be responsible for 10% of the cost.” Actually won’t be 10 percent of cost until 2020. Feds pick up full tab for the next three years, then 95 percent, 94 percent, and 93 percent in 2017-2019, falling to 90 percent in 2020 and thereafter.
You get a clearer sense of where Farrer is coming from when he gets away from specific numbers and policy details and focuses on broad ideological talking points: “Calling Obamacare ‘the Affordable Care Act…doesn’t mean it’s true. … It’s time for Arkansas to leave Wonderland and follow Alice back to the real world where more government spending only means higher taxes, higher prices, and less freedom. … Will Arkansas borrow money from China to subsidize its health care?” And so forth. Farrer hates Obamacare, he doesn’t want the federal government sending Arkansas money for health care via deficit spending, and he doesn’t believe in government safety-net programs for the poor.
All of that is fine, but private option opponents would be better served just saying so, rather than making misleading claims about the policy.