A Private Option for Medicaid Expansion May Help the Poor, For a Higher Cost

Medicaid expansion for low-income Americans just can't catch a break, even with tentative support (or just giving in) from unexpected conservative corners, including Florida Governor Rick Scott. Yesterday, Representative Matt Salmon (R-Arizona), and five other lawmakers backed the Medicaid Expansion Repeal and State Flexibility Act, which would eliminate the Medicaid expansion included under the Patient Protection and Affordable Care Act. Hope may come from an unlikely source, however: insuring some of their poorest residents using a market-based approach. Despite concerns about providing government funding to operate a privately run program (would the inevitable desire for more profit get in the way?), it might just be the solution to providing more low-income Americans with health insurance. 

This private version was requested by the governors of Arkansas and Ohio as a way to get around conservative state legislatures opposition to the Medicaid expansion. The governors requested permission to use the Medicaid funding to buy private insurance for low-income residents from the health care exchanges that the Affordable Care Act will set up. This approach would cover adults earning up to 138 percent of the federal poverty level ($15,870 for an individual or $32,499 for a family of four). 

While Governor Mike Beebe of Arkansas is a Democrat, and Governor John Kasich of Ohio a Republican, both had initially announced their support for the Medicaid expansion, when the Supreme Court ruled in favor of it in June 2012. Their state legislatures, however, were opposed. Arkansas GOP representatives, whose numbers rose after the 2012 elections said they would only support an expansion if private insurance companies were involved. Kasich reached out to Washington shortly after hearing about this posibility, which he will introduce to lawmakers once the federal government provides written rules. 

Lingering questions remain about whether private insurance companies would be able to cover the same number of people with the same level of coverage as the original plan, and whether they will have an incentive to after the initial first few years of government support runs out.

For health care providers, according to Pew's Stateline blog, it would look just like private insurance. They would issue private insurance cards. Recipients would be responsible for certain co-pays, just like private insurance subscribers. The difference is that the state Medicaid program would pay their premiums with federal dollars. Recipients could take solace knowing Medicaid would still control enrollment, and could decide that certain people, including those with chronic illnesses should receive long-time care and other traditional Medicaid benefits. 

As for cost, according to the Congressional Budget Office providing the same level of care under a private insurerer would actually cost more than under Medicaid, where coverage to the uninsured would cost about $6,000 per year per person, while health insurance purchased on the exchange would cost about $9,000 per person. Private insurers generally pay doctors more than Medicaid does, which mainly accounts for the difference. Officials in Arkansas and Ohio maintain that their plan will not cost more, and doctors would be paid the same.  

So far, both the federal government and even advocates for the poor have been largely supportive of the private option. Matt Salo, the director of The National Association of Medicaid Directors told Stateline "It’s a potential turning point for states that are on the fence."

If the private option becomes viable, it may also reduce the power of the anti-expansion bill. After all, the expansion is optional anyway. If there is a private option, it might seem excessive for a bill like The Medicaid Expansion Repeal and State Flexibility Act to repeal a law that's not even mandatory in the first place.

Private option or not, the Obama Administration is portraying some kind of expansion as inevitable, an offer states can't refuse. Health and Human Services Secretary Kathleen Sebelius recently told USA Today that Republican governors and GOP-controlled legislatures will eventually decide to expand Medicaid in their states because the financial benefits are too big to ignore. It remains to be seen whether private insurers would have the same incentive to insure low-income Americans, but it may be their last, if unlikely hope.

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