Governor: Senate health care bill must do more to help Arkansans

Governor Hutchinson

At a Thursday press conference at the state Capitol, Governor Hutchinson argued for changing three critical components of the health care legislation introduced last week by fellow Republicans in the U.S. Senate, the Better Care Reconciliation Act.

The governor lauded the efforts of his colleagues in Arkansas’s congressional delegation for “working diligently” toward repealing the Affordable Care Act, or Obamacare, which he said was “not sustainable” for the country. However, Hutchinson then went on to critique some of the most important elements of the bill now before the Senate: an end to the Medicaid expansion for low-income adults, a cap on traditional Medicaid spending, and a reduction in the tax credits used to subsidize individual insurance policies.

Taken together, those three changes proposed by Senate Republicans would constitute a massive cut in federal spending on health care — a reduction of some $1.02 trillion between 2017 and 2026, according to the Congressional Budget Office. The proposed cut to Medicaid alone for that period would be $772 billion. Because Medicaid is administered by the states and funded by a mix of state and federal money, it would be up to Arkansas to figure out how to absorb the reduction in incoming federal dollars. That would mean kicking people off Medicaid, cutting benefits or both. Hutchinson said Thursday that the other possible option, raising taxes at the state level to make up for the lost funds, is off the table.

“The big problem is that the Senate bill does continue to shift costs to the states, and that leaves states like Arkansas with few choices,” Hutchinson said. The governor said he has been communicating his concerns to U.S. Senators Tom Cotton and John Boozman, both Arkansas Republicans.

The stakes for Arkansas are high. Almost one-third of the state’s population is on Medicaid, including about 400,000 children covered by ARKids, about 300,000 low-income adults covered under the ACA’s Medicaid expansion, and tens of thousands of beneficiaries in other Medicaid categories, including disabled and elderly people living in nursing homes or receiving in-home care. Another 70,000 Arkansans now buy insurance on the individual market, according to the federal Centers for Medicare and Medicaid Services, with most receiving a subsidy to help purchase a policy. (The size of the subsidies varies according to income, with lower-income people receiving greater financial assistance.)

Hutchinson acknowledged the need to control Medicaid costs but said the most effective means of doing so was to implement state-level reforms, rather than reversing the federal government’s financial commitment to the states. He cited Arkansas’s ongoing initiative to reduce costs within its traditional Medicaid program, which is predicted to save $835 million over a five-year period. “Here in Arkansas we have already led the way in reform and savings,” the governor said.

Several governors have stated their opposition to the legislation, including Republicans Brian Sandoval of Nevada and John Kasich of Ohio. Like Arkansas, both of those states chose to expand Medicaid to cover low-income adults and would likely suffer from a rollback of the program. On Thursday, Hutchinson would not say whether he opposes the Senate bill, noting that the legislation is “changing day by day.” Nonetheless, he outlined a vision of health reform substantially different from the legislation as it now stands, making four specific recommendations.

First, the governor said Congress should not cap traditional Medicaid spending for the aged, blind and disabled populations. “Otherwise, it represents a cost shift to the state,” he said. Under the Senate bill, the federal government would stop paying for Medicaid patients’ care on an open-ended basis and instead establish a per capita cap for the program as a whole. Hutchinson said aged, blind and disabled populations should be exempted from the per capita cap because those beneficiaries typically require the most expensive care. The governor later said he was not necessarily opposed to per capita caps on spending for other traditional Medicaid populations that require less costly care, such as children covered by ARKids.

Hutchinson said the Senate bill should give states the ability to keep the Medicaid expansion in place by means of block grants. As of Thursday, the bill would effectively end coverage for the 300,000 Arkansans benefiting from Medicaid expansion — also called the Arkansas Works program, or the private option — by eliminating a key funding mechanism established by the ACA. States that expanded Medicaid to include low-income adults under the ACA currently receive an “enhanced” federal match rate for those beneficiaries. Whereas the federal government only covers 70 percent of the cost of traditional Medicaid in Arkansas, it covers 95 percent of the cost of the expansion population. Under the ACA, the enhanced rate would eventually decline to 90 percent by 2020. But under the Senate bill, the enhanced rate would keep declining in 2021 and subsequent years until it was eventually equal to the traditional Medicaid match rate. States would be unable to bear the cost of insuring low-income adults and the expansion would end.

The Senate bill also includes a provision that states may opt to receive their overall Medicaid funding in block grant form — that is, a lump sum rather than payments based on enrollment in the program. But that option doesn’t include funds equivalent to the enhanced match under expansion, Hutchinson said.

“We would urge the Senate to include the expansion population in that block grant option,” he said. “If we do this, then the states can assume risk, create savings, and assure continued coverage for the working poor.”

The governor said the Senate bill must provide more assistance for low-income people seeking to buy insurance individually. The ACA created a sliding scale of tax credit subsidies to help low-to-middle income individuals pay the cost of premiums on private insurance policies purchased on the individual marketplace. (These are individuals whose incomes are too high to qualify for Medicaid expansion: The subsidies assist people who make between 138 percent and 400 percent of the federal poverty line.) The Senate bill would not eliminate those subsidies entirely, but it would scale them back and distribute them differently. In practice, this would mean most lower-income people would pay more for individual coverage.

The change holds particular significance for Arkansas, as Hutchinson is attempting to implement his own reforms that would shift around 60,000 low-income adults (those whose incomes range from 100 percent of the poverty line to 138 percent) from expanded Medicaid to the individual marketplace. In doing so, the governor hopes to shrink the size of Arkansas Works enrollment while providing coverage options for those removed from the program. But that plan is only viable if individual insurance remains affordable.

“If that subsidy is not sufficient in the marketplace, then that individual who loses coverage under the Medicaid program will [decide], ‘I can’t afford it,’ and will ultimately wind up with lost coverage,” Hutchinson said. “You have to be able to give them an incentive to move up the economic ladder, to move off of Medicaid, and to have that incentive you have to have sufficient subsidies, as tax credits on the individual marketplace. … That needs to be redone in the Senate bill.”

Hutchinson said the Senate bill should “give states greater control over the Medicaid program” generally. Medicaid is administered by state agencies like the Arkansas Department of Human Services, but its implementation is overseen by the federal Centers for Medicare and Medicaid Services. When Arkansas wants to make significant changes to its Medicaid program, it typically must seek a waiver from the federal authorities to do so. Hutchinson said the Senate bill does provide some additional flexibility to states but does not go far enough in devolving authority.

Hutchinson said giving states more administrative freedom — rather than making blanket cuts to federal spending — is the key to controlling costs, again citing the $835 million in savings that Arkansas is projected to achieve in traditional Medicaid. “We can continue to cut the cost curve in Medicaid growth, share the savings with the federal government, but let’s maintain sufficient coverage so that we’re not going to be ending coverage for 300,000 Arkansans,” he said. “We don’t mind assuming the risk at the state level if we have the flexibility and the tools that we need to manage the costs,” he added later.

Earlier this week, Senate Majority Leader Mitch McConnell delayed an expected vote on the Better Care Reconciliation Act until after the July 4 recess due to flagging support from both conservatives and moderates within his caucus. The legislation is likely to be revised before Republicans attempt a vote. The Congressional Budget Office estimated that the bill would reduce the federal deficit by $321 billion over the 2017-2026 period and result in 22 million more Americans being uninsured by 2026 than would be the case under existing law.

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