Horrible Medicaid “Private Option” Now Found Deficient by Former “Private Option” Analyst/Cheerleader

The "private option" in a picture.
The “private option” in a picture.

I wrote last week that the air had been released from the Medicaid “private option” balloon and that it was time for conservative legislators to abandon it. Now Avik Roy, a senior fellow at the Manhattan Institute, has landed another blow to the “private option” hopes of Governor Beebe and several Republican legislators.

Roy has a column in Forbes today entitled “The Arkansas-Obamacare Medicaid Deal: Far Less Than It First Appeared.” The title is significant for two reasons. First, it’s significant because the title concedes that the private option is a part of Obamacare — a notion advanced by Michael Cannon and repeated by this blog. We were criticized for suggesting this by Republican “private option” advocates, who argue that the “private option” is inherently a “free-market approach.” (That argument would seem to demonstrate, among other things, that farm subsidies are a triumph of free markets.) Second, the title of Roy’s article is significant because it signals a significant shift in Roy’s position. In the policy world, Roy was an early adopter of the “private option.” Now reality is starting to set in.

Roy’s article centers around a new memo that was dumped by the U.S. Department of Health and Human Services on Friday. It spells bad news for Arkansas lawmakers who were holding out hope that spending $2 billion over the next 10 years would “save” Arkansas money. The memo also makes one thing abundantly clear: the “private option” is Medicaid expansion, no matter how hard lawmakers are working to “re-brand” it.

From the piece:

Basically, what HHS states in its memo is that its deal with Arkansas is not that different from its traditional endorsement of the use of private managed-care plans to administer the Medicaid benefit. But HHS explicitly states that these private plans cannot modernize the design of Medicaid insurance to make it more cost-effective….What this means, in practice, is that the kinds of plans that insurers will offer on the Obamacare exchanges—which will be able to use tiered co-pays and other instruments of modern health insurance in order to drive cost-efficient care—will not be available under the faux-exchange plans that Obamacare assigns to the Medicaid expansion population.

Additionally, Roy points out that it’s largely unclear whether or not the “private option” would actually provide higher reimbursement rates to doctors. This is relevant to Arkansas legislative deliberations, because at least one Arkansas lawmaker has expressed this possibility as a potentially positive aspect of the plan:

 …it remains to be seen whether or not Arkansas’ deal—and similar proposed deals in other states—will have the opportunity to pay providers at competitive rates. If they can’t, then the faux-exchanges will result in the same poor access to physician care that Medicaid does today.

Finally, Roy points out that the HHS memo expressly indicates that the waivers for the “private option” will expire in 2016:

Exchange-based expansions could theoretically continue under the new authority, but the Obama administration could just as easily yank the states back into the traditional Medicaid program.

If you trust the Obama administration, then it’s not an issue. But if you were cynical, you could imagine that HHS is trying to make a display of showing flexibility now, because the agency knows that it can withdraw that flexibility later on, after the coverage expansion has been implemented, and states have relinquished their negotiating power.

My goodness — could it be that the “private option” contains a lot of sizzle, but very little steak? Could it be that the Arkansas Times, whose coverage of this issue has been praised by allegedly conservative lawmakers, is missing the boat? Maybe this is all just one bad April Fool’s joke. Perhaps the public will be convinced that spending twice as much money is going to save taxpayers oodles of money. Color me puzzled.

Stay tuned to The Arkansas Project: we will have a big announcement about some Medicaid developments later this week. You won’t want to miss it.

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