Already at least a month behind schedule on implementing a series of proposed changes to the state’s Medicaid expansion program, Arkansas Works, Governor Hutchinson still has received no word on the federal approval he needs to move forward.
Last week, Hutchinson met with federal officials to plead his case. “I have personally visited with numerous Administration officials making the case for Arkansas’ innovative Medicaid waiver request that would continue the reform efforts to control costs and to put into place work and responsibility requirements,” Hutchinson said in an email. “These meetings have been productive.”
In June, the state submitted a request to the Trump administration for a series of alterations, including work requirements and a change in eligibility that would remove tens of thousands of Arkansans from the rolls. Hutchinson has consistently said that he is confident that the changes will be approved, but has expressed some anxiety in recent months about the timeline. The original target start date of Jan. 1 is no longer a possibility, state officials say. The Department of Human Services told the Arkansas Nonprofit News Network last month that in order to initiate the necessary alterations in program infrastructure, it would need 60 days to implement the changes once the state receives federal approval.
In early November, a spokesperson for the governor said that Hutchinson was optimistic about receiving an answer by Nov. 7. With no response more than three weeks later, Hutchinson said that he still believes his efforts are on course.
“The timeline for the response to the waiver may be delayed because of the resignation of former [federal Health and Human Services] Secretary Price and the fact that the new Secretary has not yet been confirmed by the Senate,” Hutchinson wrote by email. “While the final waiver decision has not yet been made, I am confident that we are on the right track and that the reforms under Arkansas Works will continue."
At least some federal officials are reportedly leery of the state’s request to limit Medicaid expansion eligibility. Asked specifically whether he had concerns that this provision might be in jeopardy, the governor did not respond directly, but wrote that in all of his meetings with federal officials, “the Administration has recognized the unique features of Arkansas Works and how the proposed reforms are consistent with providing the states with more flexibility and the ability to restrain the growth of the Medicaid budget — both federally and in the state.”
More than 300,000 Arkansans are currently covered under the Medicaid expansion, which provides health insurance to adults who make less than 138 percent of the federal poverty level (that’s around $16,500 for an individual or $34,000 for a family of four). The federal Affordable Care Act (ACA) provides most of the funding for states that have chosen to expand Medicaid. Arkansas opted to do so in 2014, during the Gov. Mike Beebe administration, via a unique approach then known as the private option, which used Medicaid funds to purchase private health care plans for eligible low-income Arkansans. Hutchinson kept this policy — which he re-branded Arkansas Works — in place, but received federal approval for a new waiver of Medicaid rules to implement a few changes last year, including imposing small premiums on certain beneficiaries.
The election of President Trump opened the possibility for additional changes that the Obama administration would not approve. In June, the state submitted a request for a series of amendments to the Arkansas Works waiver. The most dramatic alterations would reduce the number of Arkansans eligible for the program and impose work requirements on most beneficiaries who remain.
Enrollment would be limited to those who make less than 100 percent of the federal poverty level (that’s around $12,000 for an individual or $24,500 for a family of four). According to the DHS, that means around 61,000 current beneficiaries — those who make between 100 and 138 percent of the FPL — would be removed from the program. They would then be eligible for either employer-sponsored health insurance or federally subsidized private coverage on the ACA marketplace.
Among remaining beneficiaries, those between the ages of 18-49 would be required to work 80 hours per month; if they were not working, they would have to participate in job training programs or certain approved volunteer activities. Beneficiaries would have to be in compliance for nine months out of the year or they would be removed from the program for the duration of the year. Beneficiaries 50 or older would not be subject to the work requirement; exemptions would be available for others who met certain criteria, such as caring for dependent children.
These two headline amendments — work requirements and limiting eligibility to 100 percent of the federal poverty level — were lines in the sand that the Obama administration was unwilling to approve. The Trump administration, however, has signaled that it would allow states greater leeway to use waivers to make conservative alterations to Medicaid expansion.
Most observers believe that approval for the state’s request for work requirements is a sure thing, but it’s less clear whether the Trump administration will go along with Hutchinson’s proposed reduction in eligibility. Politico reported in October that Seema Verma, who directs the federal Centers for Medicare and Medicaid Services, wrote a draft memo that summarized options but did not make a recommendation on the issue of “partial expansion” — limiting Medicaid expansion coverage to 100 percent of the federal poverty level rather than 138 percent as prescribed by the ACA, as Arkansas now proposes to do. Politico, citing two unnamed sources, reported that the memo included objections from some White House staffers expressing “reservations about granting such expansions and letting states tap into Obamacare’s generous federal funding boost.”
One challenge for the Trump administration in analyzing Hutchinson’s partial expansion proposal is the possibility of setting a precedent that other states may want to follow. Red states that have thus far declined to expand Medicaid may be motivated to do so if they too can acquire a waiver to limit eligibility to the poverty line. Meanwhile, current expansion states could also have an interest in piggybacking on the Arkansas proposal in order to save money for state budgets. States chip in for a small percentage of the costs of Medicaid expansion; if the 100-138 population moves out of Medicaid, states would no longer be on the hook for that contribution. That would save more than $60 million over four years for Arkansas, according to estimates from the DHS. Other states will likely come calling for the same deal if Hutchinson’s proposal is approved. That includes some blue states, too: In September, Massachusetts asked for a similar waiver amendment for partial expansion.
The politics for the Trump administration are complex as it weighs the possibility of opening the door to partial expansion. On the one hand, partial expansion might be seen as a conservative win that reverses the Obama administration’s guidance and reduces the eligibility for Medicaid expansion. However, granting partial expansion might lead to more states expanding Medicaid, which could be viewed as a win for Obamacare that President Trump is loathe to grant. Granting partial expansion would also lead to higher numbers of people in the ACA marketplaces, which could likewise be construed as news that helps the optics of the health care law that Trump remains eager to repeal.
It’s not just political symbolism that might worry the Trump administration. The budgetary implications of transitions to partial expansion are complicated, but in general federal officials may have reason to fear that a large group of states making this switch will increase federal costs. With no state contribution, the cost of subsidizing coverage for people in the 100-38 population who moved to the ACA marketplace would fall entirely on the federal government (the beneficiaries themselves would also typically be on the hook for more costs if moved from Medicaid to the marketplace). The potential impact on the federal budget would be somewhat muted in Arkansas. Because of the state’s unique “private option” approach — Medicaid covers this population by purchasing private plans on the ACA marketplace — the shift in Arkansas would involve who pays for the coverage, but the plans themselves would be the same. But in other piggyback states, such as Massachusetts, the coverage itself would be more expensive under partial expansion, because the 100-138 population would move from Medicaid plans to private plans. Those private plans typically cost significantly more, potentially leading to dramatic cost increases overall if the same levels of coverage are maintained. Meanwhile, if red states that have thus far resisted Medicaid expansion decide to move forward because of a new option for partial expansion, that would also increase federal costs.
Given the complications of setting a precedent for partial expansion, it is notable that Hutchinson emphasized that “the Administration has recognized the unique features of Arkansas Works.” Those “unique features” could be part of one possible pitch to the Trump administration: The governor could make the case to narrowly tailor federal approval to partial expansion only in Arkansas, without setting up a domino effect for other states. Because the peculiarities of the private option create different policy and budgetary implications, perhaps the Trump administration could give the OK to Arkansas without opening the floodgates in other states.
This would likely be possible strictly as a legal matter, said Nicholas Bagley, a University of Michigan law professor who has written on partial expansion, but it would create major political headaches for the administration.
“It’s true that Arkansas is unusual,” Bagley said. “Maybe it’s so unusual that CMS could approve a partial expansion for Arkansas and no other state. But if that’s the approach CMS takes, the agency will have to fend off angry state policymakers and federal legislators who will argue that Arkansas has been given special treatment. The claim that Arkansas is different won't placate them. And CMS needs those policymakers and legislators to achieve lots of its goals. The agency will worry — rightly — about ticking them off.”
As for whether another state might be ticked off enough to file a lawsuit, Bagley said, “A lawsuit probably wouldn’t go anywhere: All the courts will ask is whether the agency had a reasonable basis for distinguishing Arkansas from another state. And since Arkansas is genuinely unusual, the agency should be able to meet that burden.”
The political and budgetary stakes are high for Hutchinson as he awaits word on the partial expansion question. The projected savings are not baked into the state budget for this fiscal year, which runs through the end of June. But the budget picture moving forward will be substantially altered depending on whether or not the tens of millions in projected state savings from the eligibility change are forthcoming. In January, the governor will present his proposed budget for the next fiscal year to the legislature; it will only include savings from the change in Medicaid eligibility if federal approval has been received at that time.
The reduction in eligibility is also a key part of Hutchinson’s argument for the continuation of Arkansas Works, which has faced frequent challenges from conservative opponents in the legislature. In the last two legislative fiscal sessions, the program narrowly survived uphill battles to secure the appropriation to continue the program. The political future of the state’s Medicaid expansion program has teetered in doubt since the day it was passed; if the federal government turns down Hutchinson’s request, the reauthorization fight is likely to heat up once again.
If the federal government does approve the state’s request, advocates for beneficiaries warn that the state’s working poor will end up paying the price. “Our greatest concern is that tens of thousands of Arkansans will become uninsured because they are no longer eligible for Arkansas Works, unable to afford other coverage, or simply fall through the cracks because of the constant policy changes,” said Marquita Little, health policy director for Arkansas Advocates for Children and Families.
The governor’s proposal is more popular among those who oppose the Medicaid expansion altogether. “Americans for Prosperity Arkansas has always opposed Medicaid expansion, but the waivers represent strong steps in the right direction,” said Ryan Norris, state director for the advocacy group. “That said, we continue to believe the state should wind down the program entirely.”
This reporting is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans. Find out more at arknews.org.