The Verdict Is In: Time for Conservatives to Abandon the “Private Option”

medicaid expansionFor the last several weeks, we have heard a few Republican legislators explain the wonders of the Medicaid expansion that has newly been christened the “private option.” It was allegedly the Medicaid model to end all models; the real conservative solution to grappling with Obamacare that we had all been longing for. Unfortunately, the Department of Health Services deflated this daydream yesterday when they released their fiscal analysis of the three Medicaid options for the state.

The options are:

1. Embracing traditional Medicaid expansion as laid out in Obamacare, expanding eligibility and adding as many as 200,000 people to the existing program (many conservative legislators have flatly rejected this).

2. Adopting an alternate Medicaid expansion plan (called, by its advocates, the “private option”) that would expand eligibility but allow the newly eligible Medicaid recipients to purchase private insurance with state/federal money (The B-S Plan).

3. Do nothing and put those who are currently eligible in the existing Medicaid program as required by Obamacare.

For weeks, we have been begging for more information on the “private option” plan, as legislators have been indicating a definite shift towards that model. We finally got a few insights on Tuesday from Senator David Sanders and Rep. Randy Alexander, but details have still been scarce. One of the main questions surrounding the private option has been the cost. Now DHS has released their formal estimates and it’s not a pretty picture. Here are the estimates for the state’s share of the costs over 10 years:

1. Traditional Medicaid expansion: $2.02 billion

2. Private option expansion: $1.96 billion

3. Doing nothing: $1.12 billion

(For those doubting my interpretation of the numbers, I spoke with DHS spokesman Amy Webb and she confirmed that this is a correct way to interpret the report.)

Senator Sanders, Speaker Davy Carter, and others have speculated that the cost would likely not exceed 15% more than the cost of traditional expansion — or, as Sanders said this week, it could even cost less. I suppose by that metric, they are correct: the “private option” will cost less than traditional expansion, based on these “objective” numbers from DHS. However, look how much less doing nothing will cost Arkansas taxpayers: approximately $850 million of “savings,” a difference of 76% by my calculations.

Despite the significant increase cost to the state, lawmakers are all over traditional and social media now saying the private option will “save taxpayers money.” Here is Speaker Carter’s comment to the AP yesterday on the DHS numbers:

These numbers appear to back up the idea that this private option could lower the cost to the state over the long run – really, even over a short number of years.

I find this statement to be highly unserious. Expanding Medicaid isn’t going to save any money. As I said yesterday, that’s like Obama saying he’s cutting the debt by increasing it less. Lawmakers have the option to do nothing and reduce the increased costs to taxpayers by nearly $1 billion. Why wouldn’t they take this opportunity? Perhaps, as Senator Sanders said, it’s going to hurt their ability to negotiate for Medicaid reforms? If that’s the case, they’re going to have to find over $850 million in reform savings before the expansion “pays off.”

In short, the Speaker’s argument is this: in an alternate universe, we might have spent more, so whatever we do in this universe constitutes saved taxpayer money. This is the same kind of verbal gamesmanship we saw from Democratic congressional leaders for decades; they were always eager to explain that year after year of expanding federal budgets actually signified more and more savings.

State Representative Nate Bell recently laid out three tests that any movement on Medicaid must meet. Bell said on his Facebook page that these qualifications “are necessary before most conservatives will support any measure.” He said that he would not support any measure that did not meet all three requirements:

1. No net increase in combined state/federal spending above the minimum that would occur if we took no action.

2. No state assumption of any new long term responsibilities or “strings.”

3. No state run or state/federal partnership health insurance exchange.

These metrics are sound and represent good governance. The private option, we can now definitively say, violates metric #1. If Nate Bell is correct, most conservative legislators must therefore be opposed to the private option.

It seems more clear to me now than ever that “doing nothing” is the best way forward for Arkansas taxpayers. Those currently eligible for Medicaid that are not already enrolled will gain coverage, taxpayers will save money, and the federal deficit will not grow (as fast). In addition, it will prevent the construction of a new Obamacare bureaucracy in the state, making repeal more feasible. The law is already beginning to crumble — Arkansas shouldn’t give it a hand up. The private option isn’t a fiscally responsible path forward.

But hey, what do I know? This is just one man’s theory that spending less money means spending less money and spending more money means spending more money. I’ll have further analysis on the DHS report in the coming days, including perhaps some comment on the “macro economic impact” that they say will “save” Arkansas taxpayers $715 million!

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