Arkansas approves Medicaid expansion alternative

LITTLE ROCK, Ark. (AP) -- Arkansas' plan to use federal money to buy private insurance for low-income residents won final approval from state lawmakers Wednesday, endorsing a model that several other states are eyeing as a possible alternative to expanding Medicaid.

The Republican-controlled Legislature narrowly reached the three-fourths majority needed to pass the proposal, which was a compromise reached between leading GOP lawmakers and Democratic Gov. Mike Beebe.

Under the proposal, Arkansas would accept the money intended for Medicaid expansion under the federal health care law, but instead use it to buy private insurance for about 250,000 eligible low-income residents. Those individuals who earn up to 138 percent of the poverty line — or $15,415 per year — would purchase subsidized private insurance through the state's insurance exchange.

Subsidizing the purchase of private insurance for low-income residents as opposed to adding them to the state's Medicaid rolls was viewed by Republican backers of the plan as the most palatable response to President Barack Obama's health care law — a policy many GOP lawmakers campaigned against last fall as they won control of the state Legislature for the first time since Reconstruction.

"It's taking something that most Arkansans would never have approved and making it better," Beebe told reporters Wednesday. "And making it fit for Arkansas."

The proposal attracted the support of all Democrats and more than half of Republican lawmakers, who pitched the "private option" plan to their caucus as a conservative reform of health care.

"We wanted to have a program that let the markets control the market as much as possible, not the government controlling the markets, and this is the result of those conservative principles," said Sen. Jonathan Dismang, one of the plan's key Republican sponsors.

But some conservatives — including the House GOP leader — opposed the proposal, saying they didn't want to increase government spending on what they believe is a broken program. They said they're also concerned about the cost to the state after the federal government's full funding of the private insurance subsidies begins to scale back towards 90 percent after the first three years.

Implementation of Arkansas' approach to using federal Medicaid dollars hinges on approval from federal officials. U.S. Health and Human Services Secretary Kathleen Sebelius has endorsed the concept of the plan but has stopped short of green-lighting the specific proposal.

Still, the plan has attracted attention from other states looking for flexibility under the federal health care law. Governors and state lawmakers in Ohio, Florida, Louisiana, Texas, Maine and Tennessee have expressed varying degrees of interest in the type of Medicaid "private option" plan that Arkansas approved Wednesday.

Leaders in Arkansas and Ohio have been the most active in negotiations with federal officials over the plans, according to Matt Salo, executive director of the National Association of Medicaid Directors.

"If Arkansas and Ohio can figure out a way to make this work, I do think you'll see a lot of other states perk up and say 'Now I know what's on the table, what does that mean to me?'" he said. "Anywhere where you have a state that's said 'no' to expansion or has been leaning towards no, this is a potential game changer for them."

Aside from federal approval, a range of logistical and policy issues would still need to be sorted out before the plan could be implemented, Medicaid experts said.

"Arkansas is putting on the table a new wrinkle in the way that states could move forward that has been attractive because it has the word 'private' in it," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured. "This approach has a lot of appeal to those who opposed more government being involved in health care, but the terms are going to be negotiated. The devil is always in the details."

On the one hand, providing private health insurance to low-income people could help ensure continuity if an individual's income fluctuates around the Medicaid-eligibility thresholds. But, Rowland said, the implementation of the private option would involve figuring out how a complicated set of federal Medicaid rules would interact with the private insurance plans offered in the exchange, which have yet to be determined.

Beebe said the state has been in constant contact with federal officials about the private option proposal, including a package of last-minute amendments that were made Wednesday afternoon to win support from some skeptical Republicans.

"If they run backwards on us, this all goes away," Beebe said. "So if they don't hold up their end of the deal, we won't be doing this and I won't be trying to get us to do this. All of this is predicated on the feds doing their part."

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Associated Press Writer Andrew DeMillo contributed to this report.

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Follow Michael Stratford at http://twitter.com/mstratford .