2013 General AssemblyArkansas LegislatureMedicaidObamacare

Rep. Farrer: “Private Option” Cost Could Exceed Four Times Original Projections

farrer-joeThe following is a guest op-ed from Representative Joe Farrer, first-term state representative from Cabot:

I wasn’t allowed to read the “private option” bill until ten days before I had to vote on it. I wasn’t given any solid budget projections. I wasn’t given solid guidelines for how the program would operate. Instead I was asked to “just trust” the architects of the plan. The infamous words of Nancy Pelosi haunted me: we needed to pass Obamacare so we could find out what was in it, she said. Now, incredibly, Republicans in Arkansas were making the same plea. I was asked to approve the largest spending increase and expansion of government in the history of the state of Arkansas. This tested me like no other vote I’ve ever cast.

According to the authors of the “private option,” their plan is the most conservative approach to save us from Obamacare. But the way I see it, just because you call something conservative, that doesn’t make it so. A plan or a program is only conservative if it follows conservative principles. Those principles are limited government, less spending, and more freedom.

I have worked in the healthcare industry for 25 years. I’ve dealt with all kinds of insurance, including Medicare and Medicaid. Since the legislative session ended, I have spent many hours following the “private option” money trail and trying to discover what exactly makes it a “conservative” plan. I’m still looking.

Proponents of the “private option” say their plan will insure 250,000 people with incomes up to 138% of the federal poverty level. There will be no additional costs to the state of Arkansas until 2017. By 2020, Arkansas will be responsible for a tenth of the costs. But even today, months after the passage of the plan, its architects still cannot tell you the exact cost of one insurance policy for an enrollee.

Their best guess is a cost of $437 per month per policy and a 6.5% yearly policy price increase. Using their numbers, the 10-year cost to the state will be $1.9 billion. They’re also factoring in $714 million in positive economic activity as the result of this additional government spending, using the same Keynesian approach that President Obama depended on to sell his massive spending plans. As you may have noticed, jobs and economic growth are still pretty scarce. Keep in mind, we already spend about $5 billion per year on Medicaid in Arkansas.

Even if those numbers are correct, they don’t paint a very pretty — or conservative — picture for the state budget. But I recently spoke with an actuary whose company is joining Arkansas’s exchange as part of the “private option.” He told me that his group is estimating the price per policy will be over $600 per month with a 10-year average premium increase of 15%. If his numbers are correct — and there is reason to believe they are — the real cost of the “private option” to the state will be $9.14 billion over 10 years. That’s over four times the original cost given to us by “private option” supporters.

We also have to factor in “wrap-around” costs. Wrap-around costs are incurred when the cost of care exceeds the amount that Medicaid will reimburse healthcare providers. Under the “private option,” guess who gets to pick up the excess costs? The taxpayers, of course. I only wish I could give you an estimate of what the wrap-around costs will be. After speaking with the insurance commissioner and an architect of the plan, it appears that no one really knows.

Taxpayers might also be interested to know that the “private option” doesn’t offer a family policy plan. Therefore, a family of four will require up to three individual policies from the same company, costing as much as $29,000 per year. This is an enormous cost that should have been disclosed before the legislature voted on this plan. Of course, none of these figures factor in the additional revenue loss we will see from stifled economic growth that is determined by this massive increase in government bureaucracy and spending. If the Obama presidency has taught us anything, it’s that “spending your way to prosperity” simply does not work.

After having the time to conduct this research — a luxury I did not have before I was required to vote on this plan — I can say without a doubt that I made the right vote. There was no justifiable reason that Arkansas had to rush into implementing Obamacare and we certainly did not have to expand Medicaid. If we had taken our time, we would have known that the Obama administration was going to delay the employer mandate for another year, negating the “savings” and much of the stated need for the “private option.” Instead of giving Obamacare a lifeline, we could have helped drive a nail in its coffin.

Obamacare is falling apart under its own weight. Arkansas should not have rushed to implement it. That would have been the conservative thing to do. The legislature should move immediately to stop all implementation of this plan — even if that requires a special session.

Joe Farrer

State Representative, District 44

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