Monday, December 10, 2012

TOP STORY >> Mills would want Medicaid expansion

Special to the Leader

Expanding health insurance so that it covers nearly everyone in Arkansas and not just the aged, the disabled and poor children who are insured by the system crafted 50 years ago by Rep. Wilbur D. Mills of Kensett (White County) is nearing reality.

Or so it was thought until two events intervened: the U.S. Supreme Court’s June decision upholding all but one part of the Patient Protection and Affordable Care Act and the election four months later that gave Republicans a bare majority in the Arkansas legislature.

Whether some 215,000 people, Arkansas’ poorest, will be insured will be up largely to those Republicans when the legislature convenes in January, and because nearly all of them ran for office vaguely opposing “Obamacare” it would seem to be foregone that the poor in Arkansas will still be without coverage when the law kicks in fully at the end of next year.

But the politics of “Medicaid expansion” has turned out to be more dangerous than the politicians imagined when they were condemning Obamacare and promising to do what they could to thwart every part of it in Arkansas. It will not be only the 215,000 men and women who will be eligible for government help on their hospital and doctor bills who will disappointed if the Medicaid expansion is blocked. Not many of the very poor vote anyway. But tens of thousands of others, including the frail elderly and disabled in nursing homes and their families, will be hurt even more if the Republicans block Medicaid expansion. In fact, everyone, including people who are already insured and otherwise unaffected by the Affordable Care Act, will be impacted because their own hospital bills and insurance premiums may go up as a result of the state’s refusal to expand Medicaid.

Legislators will have to factor the politics of all that when they vote whether to appropriate federal and state funds to expand Medicaid to cover childless men and women whose incomes leave them below 133 percent of the federal poverty line. Under Arkansas’ Constitution, it takes three-fourths of both houses to pass nearly all appropriations, so only 26 members of the 100-member house or nine of the 35 senators can block any appropriation.

Congressman Mills, by then the most esteemed member of the U.S. House of Representatives, cobbled together the lengthy 1965 amendment to the Social Security Act that created Medicare and Medicaid, the former to cover hospital and physician care for the elderly and permanently disabled and the latter to help the elderly frail in nursing homes and the poor who qualified for public assistance and poor children.

Medicaid was to be a partnership between Washington and state governments, and the states could choose how much health coverage to give to the poor beyond certain programs that were mandated for every state that participated. Mills’ state was very poor and he established a cost-sharing formula that favored poor states.

The federal government would pay at least half the costs of Medicaid, but the precise federal share would vary according to each state’s ranking on per-capita incomes. Because Arkansas has always been near the bottom, its share has ranged between 20 and 30 percent and the federal government’s between 70 and 80 percent. States like New York and Massachusetts always bear half the costs in their states.

That formula, which shifts a little each year when the per-capita income rankings of the states are compiled, is a source of the Republican legislators’ dilemma. It is complicated business and requires a little attention.


First, a primer on the Affordable Care Act, which was fiercely hated in Arkansas when Congress passed it in 2010, although Arkansas’ senior senator then, Blanche Lincoln, helped write it and the other senator, Mark Pryor, voted for it in spite of heavy mail against it. Opposition has relaxed as people learn more about it and many realize its benefits for them, but Republicans in many parts of the state still found it a good election issue.

The law is long and complicated, but it has four major provisions.

(1) Medicare is expanded to give people free health screenings and to pay more of their prescription costs, and Medicare’s long-term outlays are reduced by scaling back payment rates to hospitals and other providers and by reducing the government subsidies to insurance companies that sell managed-care plans to Medicare recipients.

(2) Insurance companies next year will no longer be able to deny coverage to people with pre-existing conditions like cancer, heart trouble or diabetes.

(3) Medicaid is expanded in 2014 to cover the able-bodied adult poor at 100 percent federal cost until 2018, when the states will begin to pick up a rising share, which will be capped in 2021 at 10 percent.

(4) Employers with more than 50 full-time employees and individuals who are uninsured will be required to purchase an insurance plan from an array of plans offered by insurance companies in an exchange or market organized by either the state or federal government. Arkansas Republicans want the federal government to run the exchange; Beebe wants the state to run it. Large employers and individuals who opt not to participate will pay a tax to the government, although the tax will be lower than the cost of insurance.

The federal government will help people pay for the insurance if their family incomes are between 133 and 400 percent of the federal poverty line, which for a family of four this year would be between $23,000 and $92,000. If family incomes are below 133 percent of the poverty line, they are eligible for Medicaid.

The Supreme Court upheld all the Affordable Care Act except the provision that required states to participate in the Medicaid expansion. Although states already are required to participate in a few Medicaid programs, the court said they could elect not to participate in this expansion.  A big majority of states will participate, but several Republican governors promptly said they would keep their states out of the coverage of poor adults even though their states would bear none of the initial costs.

Gov. Beebe said it was a no-brainer for Arkansas and he expects Arkansas to embrace the coverage, but if the Legislature doesn’t pass the appropriation that authorizes the federal expenditures the 215,000 Arkansans who are eligible will not be covered. Since the election, several Republican legislators have softened and said that they might support the Medicaid expansion, maybe with a few conditions.


If Arkansas does not participate in the Medicaid expansion, it will create a perverse situation. Everyone in Arkansas will have access to health care, most of them with insurance subsidized by the government, except the poorest workers, typically those earning minimum wage up to $12 an hour or who do not have full-time jobs.

The Affordable Care Act was a bonanza for Arkansas from the outset, as the state’s surgeon general, Dr. Joe Thompson, said. Since Arkansas is so poor and so few people are insured, the two major elements of the law — the insurance exchanges and Medicaid expansion — will flush billions of dollars into the Arkansas economy while improving the health and security of its people.

Two hundred thousand Arkansans who do not have health insurance, mainly because they cannot afford it, will get federal help paying the premiums. For those whose incomes are barely above 133 percent of the poverty line, the government will pay most of the premiums. Another 215,000 will be eligible for Medicaid, and the state will bear none of those costs until 2018.

All those federal dollars will turn over several times in the Arkansas economy — six times according to the Walton College of Business’ model, and increase the state’s revenues from income and sales taxes.

But if Arkansas stops the Medicaid expansion the effect will be worse than simply denying the medical care to the 215,000 and keeping the federal money out of the Arkansas economy.

That is because it also will deprive Arkansas of an additional subsidy that will help pay for some Medicaid services that are currently borne by the state. The Affordable Care Act shifts those costs, estimated at $128 million over two years, to Washington but only if the state expands Medicaid.

Here is what no one calculated: Since the economic collapse in 2007, Arkansas has fared better than the nation as a whole. It did not experience the depth of unemployment and the decline in personal incomes that afflicted industrial states and those along the seaboard, like Florida.

So Arkansas rose a little each year in the per-capita income rankings, and its Medicaid matching rate went up accordingly a little each year. A slight percentage adjustment results in tens of millions of dollars of extra state spending and a reduction in federal costs.

As a result, between 2008 and 2012, Arkansas experienced a big shortfall in state Medicaid matching money, but the state was lucky in another way. President Obama’s big stimulus program in 2009 sent Arkansas $825 million over three years to stabilize its Medicaid coverage during the recession. The $825 million more than made up for the state matching shortfall and enabled the state to bank its Medicaid trust fund, made up of soft-drink taxes.  Since the stimulus money ran out, Arkansas has been rapidly spending the trust fund to cover Arkansas’ higher Medicaid match.

The trust fund will run out and when the new fiscal year begins next July, Arkansas will face a shortage of perhaps $350 million in state Medicaid matching funds for its current programs. If the state has to slash services to save that $350 million it also will lose $1.2 billion in matching federal aid, so the total cuts would be close to $1.5 billion a year.


No one talks about raising taxes to avoid cuts in medical services. Instead, Beebe’s Medicaid office has outlined a number of cost savings it intends to implement next year, but none of them comes near closing the $350 million gap. The big step that would close it would be to end assistance for nursing home patients who can get to the bathroom and dining hall without assistance.

Republican legislators said last month they thought that was a bluff, that the state wouldn’t put 15,000 of the elderly sick on the streets. But the administration said it would not end coverage for children or the disabled in the state’s children’s colonies, which would be the other options.

If the Medicaid expansion is adopted and the federal government picks up the $128 million of state’s costs for current programs, that would reduce the state’s shortfall by a third. That provides an additional incentive for legislators to approve the expansion.

There is an even greater incentive. Hospitals and the American Medical Association, which never before endorsed a universal health-care bill, supported the Affordable Care Act even though it calls for reducing Medicare payments for hospital stays and certain procedures. The reason was that the law required people to get insured and if they were below 135 percent of poverty to be covered by Medicaid. No longer will hospitals and clinics have to absorb billions of dollars a year in charity care and raise their room rates for paying patients on Medicare or private insurance to cover the losses.

Hospitals are required to treat patients even if they have no assets or insurance. Last year, Arkansas’ community hospitals absorbed $338 million in free care for patients who couldn’t pay.


But if Medicaid is not expanded, the hospitals, especially rural hospitals in parts of the state where more than half the people have no insurance and can’t pay for extended hospital and physician care, face a financial crisis. Their Medicare reimbursements will go down under the Affordable Care Act, but their unpaid charitable care would continue. The same is true for doctors, although many doctors now do not accept Medicaid patients or poor people who cannot pay at the desk.

For that reason, hospital administrators and boards will be lobbying the legislature in January to expand Medicaid. For some hospitals, it means life or death.

The health and peace of mind of a quarter-million low-income citizens is not a big pressure point for politicians who did not count on them for votes and support in the first place. Hospital boards, families of the nursing home patients and other Medicaid recipients, and businessmen expecting the billions of federal money flushing into their communities — those people can mount some pressure.


Dr. Thompson, the surgeon general, thinks the Medicaid expansion and the subsidized premiums for people with incomes four times the poverty level offer a more far-reaching advantage for the state. Over time, providing health insurance for all low-income residents will overcome a longtime problem for small towns and rural Arkansas—the lack of primary-care doctors and facilities.

Since most residents of rural counties, especially in eastern and southern Arkansas, do not have health insurance unless they qualify for Medicare or they work for a business that covers them, small towns do not attract medical graduates and the communities cannot sustain hospitals. Most patients cannot pay for extended care or else they pay over long periods. Doctors find community practices hard and so unremunerative that they leave after a few years.

When nearly everyone has private insurance, Medicaid or Medicare, that will change. New doctors will find small towns a rewarding practice. And access to health care will make small towns and regional centers appealing for business and industry.

If they get chambers of commerce on board, the Medicaid controversy will be settled promptly.

Ernie Dumas, formerly of the Arkansas Gazette, is the dean of Arkansas journalsts.