The Arkansas Center for Health Improvement is tasked to evaluate the Arkansas Private Option Medicaid expansion. One of the things that leapt out at me is on page 12 as they detail some of the provider pricing spreads in a manner that I can use without worrying about disclosing propietary data.
@xpostfactoid1 Right now 100% Fed match as state pays in 2017, I bet talk to switch to traditional expansion #CREAM pic.twitter.com/vRuUugRbrU
— Richard Mayhew (@bjdickmayhew) June 27, 2016
This is the spread between Medicaid rates and commercial, employer sponsored coverage, broad network rates. Medicare rates in Arkansas (as of 2014) tend to be about 25% more than Arkansas legacy Medicaid rates. Arkansas actually pays a fairly high percentage of Medicare rates for Medicaid. Nationally, Medicare is roughly 150% of Medicaid and then ESI is roughly 150% of Medicare depending on the market, specialty and insurer.
Why is this important besides it being a great data illustration?
The 1115 waiver that the Private Option in Arkansas operates under is supposed to be budget neutral. It is an excellent demonstration of the flexibility of administrative rule making and agency deference when senior leadership wants to achieve a goal. If you squint hard enough, Arkansas Medicaid expansion is budget neutral under the right counterfactual. Under reasonable counterfacturals, it is more expensive than simple expansion.
As Adriana McIntyte pointed out in 2014, the GAO had a major problem with the approval of this waiver:
In approving the demonstration, HHS did not ensure budget neutrality. Specifically, HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs—significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program—without requesting any data to support the state’s assumptions. We estimated that, by including these costs, the 3-year, nearly $4.0 billion spending limit that HHS approved for the state’s demonstration was approximately $778 million more than what the spending limit would have been if it was based on the state’s actual payment rates for services provided to adult beneficiaries under the traditional Medicaid program.
HHS decided to accept pie in the sky accounting to get a coverage expansion in Arkansas.
This could have significant Wyden Waiver effects in a Clinton Administration as I’ll explain below the fold:
The Wyden Waiver (Section 1332) is a waiver system that allows states to experiment on different ways of covering their residents as long as they offer coverage that is at least as good to at least as many people for the same or lower net cost to the federal government.
The current administrative guidance on the waivers are fairly restrictive. No state level customizations can be made on Healthcare.gov so this limits most of the major changes (and several minor ones like my argument to relabel cost sharing subsidy enhanced Silvers to either Platinum Plus or Gold Plus plans in order to reduce decision complexity and decision fatigue) to only the states that operate their own exchanges and own their own source code.
More importantly, the budget neutrality restrictions are ruled fairly strictly. The 1332 waiver savings and costs can not interact with Medicaid 1115 savings and costs even if the interaction of the Exchange/subsidized individual market and Medicaid programs produce net coverage expansions at net federal cost savings. Secondly, budget neutrality is a yearly constraint. A 1332 project must be budget neutral in all years of the demonstration project instead of being budget neutral over the life of the project. This is a severe limitation as some projects could see high initial start-up costs like the creation of a state level public option in low competition states where long run costs produce significant savings.
Congress has set fairly broad objectives for the 1332 waivers. The executive, in this case the Obama Department of Health and Human Services, has rather tightly defined the mechanics by which those objectives could be reached.
On the other hand, Hillary Clinton has indicated that her HHS would be extremely receptive to 1332 waiver applications. Andrew Sprung at Xpostfactoid has more:
Touting her early support for establishing a public option in the ACA — that is, federally or state-run health plans offered in the ACA exchanges to compete alongside private plans — Clinton’s platform pledges, “To make immediate progress toward that goal, Hillary will work with interested governors, using current flexibility under the Affordable Care Act, to empower states to establish a public option choice.”
That implies, more broadly, that a Clinton HHS will look with favor on state proposals to amend ACA architecture via the ACA’s “innovation waivers”–if those proposals aim to make coverage more affordable. Under the waiver provision (ACA Section 1332), states can propose changes to virtually any ACA component if the plans credibly offer coverage as comprehensive and affordable to as many people as does the ACA, without increasing federal spending. That possibility exists now, but HHS criteria for assessing proposals can be more or less restrictive. One way HHS limited possibilities for 2017 was to not allow states to combine Medicaid waiver proposals (Section 1115) with proposals to alter the ACA benefit set per se (Section 1332). That means a state can’t offset the costs of one waiver proposal with savings claimed via the other.
Tweaking the rules so that 1332’s can be combined with 1115’s or that budget neutrality can be achieved over the lifespan of a project instead of an annual budget neutrality requirement would be a major policy change.
The Arkansas 1115 private option waiver is a good example of the flexibility that an agency can choose when it wants to achieve an end. HHS’s reading of the proposal takes heroic assumptions to justify a Medicaid expansion. Far less heroic assumptions could produce significant state level flexibility in the 1332 program.
MomSense
Holy moly is right.