Feds letting Arkansas privatize Medicaid expansion; idea could spread like wildfire, as in Florida, but cost questions remain

Arkansas has turned heads nationally with its preliminary plan to expand Medicaid using the private insurance market, showing that the Obama administration is willing to give states more flexibility than expected in expanding the program.

Health and Human Services Secretary Kathleen Sebelius has agreed to a proposal by Arkansas Gov. Mike Beebe to reject the Medicaid expansion but use federal money to buy private health insurance for the 200,000 people who would have been covered under ordinary expansion, reports Sandhya Somashekhar of The Washington Post.

States that have come down on either sides of the Medicaid-expansion issue may reconsider their decision in light of the Arkansas proposal, said Sara Rosenbaum, a health law professor at George Washington University. "If Arkansas is allowed to do this, I expect it to spread like wildfire," Rosenbaum told the Post.

The first place could be Florida, where a state Senate committee rejected Republican Gov. Rick Scott's expansion plan and proposed a privatization plan like that in Arkansas. Last week, a House committee voted to reject any expansion of the program. Scott "made it clear he was not going to lobby the Legislature on Medicaid," preferring to emphasize other issues, The New York Times' Lizette Alvarez reports. For coverage from the Tampa Bay Times and The Miami Herald, click here.

Could the wildfire spread all the way up to Kentucky?

Gov. Steve Beshear has said he wants to expand Medicaid in Kentucky if the state can afford it, but many Republican lawmakers oppose the idea, saying it would not be fiscally responsible. On the national level, 26 states and the District of Columbia have expressed a desire to expand Medicaid, 17 have said they reject it and seven are undecided, according to the nonpartisan Kaiser Family Foundation.

A more flexibile arrangement could be a game changer because it makes expansion more appealing, especially for states where expanding Medicaid has been politically unpopular and polarizing. in Arkansas, which has a Democratic governor and a Republicna legislature, officials say that from an ideological standpoint, using private insurance appeals to lawmakers from both parties, reports Somashekhar. She reports that even Democratic-led states might prefer this arrangement because it gets rid of some bureaucratic hurdles.

However, there are questions about cost. The Congressional Budget Office estimates that private insurance plans cost $3,000 more per person than Medicaid, reports Somashekhar. On the other hand, Arkansas officials say the move could ultimately save money in administrative charges along with other cost-control measures.

Although the Arkansas proposal is not concrete, it provides proof that the Department for Health and Human Services encourages innovative, state-based approaches to promote expansion. Many states may develop a new route best suited to their specific needs, without having to leave federal money on the table. (Read more)

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