2013 General AssemblyArkansas LegislatureMedicaidObamacare

The Impending Collapse of the Private Option

iStock_000016558805XSmallYou’ll probably remember that the “private option” – the Medicaid expansion that our legislature approved at the end of the session – was sold to the public on the theory that it would save money through market competition. Now that Arkansas legislators have voted for one of the biggest expansions of our state government in history, the facts are starting to come out.

“Private option” providers won’t be providing policies on the Obamacare exchange – instead, they’ll be relegated to an entirely different exchange. And as we’ve noted repeatedly on our podcasts – and as David Ramsey noted the other day – there likely won’t be any significant competition among providers. In fact, because “private option” clients won’t pay anything for these services, there will be no price competition. And because the providers have to supply the same basket of goods and services as Medicaid currently does, there will also be no competition in quality of services. In short, except for price competition and quality competition, we can expect a perfectly competitive insurance market!

Think of it this way: suppose you’re a chocolate manufacturer, and you’re attempting to compete on the market. But you’re not allowed to compete on price, and you’re not allowed to compete on quality. In what respect will you compete? Perhaps you will make chocolates with much shinier wrappers.

Meanwhile, advocates of the “private option” are cheerfully ignoring the mounting scientific evidence that Medicaid enrollment has no statistically significant health effects on its clients. What that means: Arkansas has created a gigantic spending increase for a program that, when it comes to health consequences, is quite literally a complete waste of money.

Instead, “private option” advocates have continued to spread misinformation by holding private-option town meetings throughout the state. Here’s some friendly advice for town meeting organizers: next time, hold town meetings before the vote. That way, they won’t look nearly as cosmetic as they do now.

What does the future hold? I suppose we should expect lots of Medicaid expansion TV ads containing women in bikinis — or similar attempts to entice potential clients to choose one set of services that is largely indistinguishable from another. I fear that ad agencies and insurance companies are about to make a killing on taxpayer dollars. Taxpayers, on the other hand, are about to get killed.

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6 thoughts on “The Impending Collapse of the Private Option

  • Pingback: The impending collapse of the Medicaid private option in AR « Watchdog.org

  • Joe Cordes

    My comment to the PO pimps was as follows:
    To be clear, what we are now embracing is a Federally regulated program, overseen by the State, administered by insurance companies where fraud will be at normal levels and the taxpayers are paying for it all, right? What can go wrong?

    • Christine

      What Joe Cordes said. What can possibly go wrong with this? 🙁

      Don’t forget that the private option repeal effort is underway. Let’s let the voters decide on such a massive government expansion–instead of a handful of duped Republicans. We are constantly lectured to about “good people” they are. Well, good people can still be wrong sometimes. They would not listen to voters. Now let the voters have the chance to decide.

  • critics miss major point…..the care of the population in the expansion, private option group, will rest with PRIVATE insurance plans, who will manage the networks, set the provider fees, insure access,…..just as they do with their existing customers. Improved access that will come with privately managed networks in which providers are paid commercial rates will be a major departure from the existing Medicaid program.

    • I only wish I could share your optimism, Ray. Unfortunately, the federal government (who controls Medicaid rules) has said “private option” coverage won’t be able to function substantively differently than traditional Medicaid. The main difference I can see is that private insurance companies will be getting their palms greased and taxpayers will be forking out more per patient.

  • Pingback: The Arkansas Project — Renaming the "Private" Option

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