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GAO Slams Arkansas Medicaid Expansion Costs As HHS Seeks To Bring More States On Board

Posted: September 08, 2014

HHS officials said Monday (Sept. 8) they don't have a limit on how many alternative Medicaid expansion proposals the department might approve to get more states on board, yet following their comments the Government Accountability Office criticized the department for not ensuring budget neutrality with Arkansas' expansion plan that served as a model for many states reluctant to pursue the traditional ACA option.

There's not a numerical limit on what we are trying to do with Medicaid expansion alternatives, an HHS official said. The first Medicaid expansion alternative discussion surfaced when Arkansas pioneered the premium assistance approach -- allowing Medicaid beneficiaries to go to the exchange to get qualified health plans and for that private insurance to be subsidized with dollars from the ACA's higher match.

But GAO says that in approving Arkansas' demonstration, the $4 billion spending limit HHS allowed was $778 million more than what it would have been if it were based on actual Medicaid payment rates for services under the traditional program. HHS policy requires that 1115 waivers be budget neutral to the federal government.

HHS approved a spending limit that was based in part on hypothetical costs without requesting any data to support the state's assumptions, GAO says. HHS said it disagreed with GAO's conclusions about budget neutrality. A CMS spokesperson would not respond to questions on whether GAO's findings would make it less likely for the agency to approve those types of Medicaid expansion models.

In response to the report, Arkansas Department of Human Services spokesperson Amy Webb said, "It’s clear that the GAO and HHS have a disagreement over this process that dates back years, and that really has little to do with Arkansas. We just seem to be the latest vehicle to raise that complaint. Arkansas followed the guidelines outlined by HHS and has been transparent throughout that process."

Specifically on the payment rates Arkansas decided to establish for providers under the demonstration, Webb added, "Historically, clients across the country have had difficulties getting access to physicians willing to take Medicaid because of the low payment rates. It’s unreasonable to assume we could add hundreds of thousands of clients to the traditional program and not have had to raise rates."

The GAO report was released shortly after HHS Secretary Sylvia Burwell, in her first public remarks since being confirmed, said she would work with governors “to bring more states into the fold on Medicaid expansion.” When CMS initially outlined its position about Medicaid expansion premium assistance models, the agency said it would only consider a “limited number” of premium assistance waivers for the individual market because they would help inform future policy. Since then, several states have come forward with Medicaid premium assistance and other expansion proposals that HHS has either approved or is considering approving.

Iowa was the second state to have a Medicaid expansion premium assistance demonstration approved; GAO similarly says that HHS gave the state flexibility to adjust its spending limit and waived the cost-effectiveness requirement.

“If, as it did with Arkansas, HHS allows states to use an approach to expanding Medicaid that is expected to cost more than expansion under the existing Medicaid program with fewer cost controls in place, there could be significant cost implications for the federal government,” GAO says.

New Hampshire Gov. Maggie Hassan (D) in May announced that the state had submitted an 1115 waiver that includes several elements related to Medicaid premium assistance, though components of the state's Medicaid expansion have already gone into effect. The waiver would expand coverage through a “voluntary bridge to marketplace plan” that would offer coverage to eligible individuals through either managed care organizations or qualified health plans in 2014, and beginning in 2016 the waiver would establish a mandatory premium assistance program providing coverage for eligible adults through plans on the exchange.

Utah Gov. Gary Herbert (R), as part of his “Healthy Utah Plan” that would expand Medicaid, is seeking to tie subsidies for private insurance to the ability of a beneficiary to work. That element is similar to one Pennsylvania had pushed for but was not ultimately approved by CMS. Herbert's plan would also take Medicaid expansion matching dollars and use them to subsidize QHP coverage for beneficiaries.

Burwell noted in her speech at George Washington University that HHS just approved Pennsylvania's Medicaid expansion model. However, key components of Pennsylvania's proposal were not approved, including work requirements and incentives. Pennsylvania had initially wanted to use Medicaid premium assistance as an option for expanding the program, however, as the GAO report notes, the state during the review process decided against the approach and directed its efforts toward a different model.

Michigan does not use Medicaid premium assistance to let beneficiaries purchase exchange plans, but under an 1115 waiver for expansion it obtained approval from CMS to charge premiums to individuals between 100 and 138 percent of poverty and the state set up health savings accounts.

Indiana is still negotiating its Medicaid expansion 1115 waiver and CMS is taking comments on that state's proposal until Sept. 21.

Tennessee has expressed a willingness to pursue an alternative expansion, and Wyoming Gov. Matt Mead (R) has also been meeting with federal officials to discuss expanding the program, according to an August Associated Press story.

Virginia Gov. Terry McAuliffe (D) has said he'll push for Medicaid expansion but has been hamstrung by Republicans in the Virginia General Assembly, who do not support the ACA option. On Monday, McAuliffe announced a plan to expand health care services to Virginians but the executive order would only provide coverage to 25,000 uninsured -- 20,000 adults with mental illness will get new access to mental and behavioral health services and 5,000 children of state workers will be eligible to get insurance through the Family Access to Medical Insurance Security program. Medicaid expansion under the ACA, on the contrary, would expand access to 400,000 uninsured adults. -- Rachana Dixit Pradhan (rdixit@iwpnews.com)

Related News: Inside Health Reform

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