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Arkansas Medicaid Expansion: A Tilted Playing Field

If the bookies have it right, the Patriots will face the Seahawks in Phoenix on February 1. Suppose the NFL decided to tilt the Superbowl field so that the Patriots, to have a fighting chance, would be playing downhill.

That would not be fair, would it?

Of course not. Tilting the field is immoral in sports. But it is just as immoral in politics and public policy. Especially when there are billions of taxpayers' dollars at stake.

To find our way to the tilted playing field, let us begin with the defunct SHARE plan, the plan that the Wyoming Department of Health developed as a way to get Medicaid Expansion passed. While the plan failed to make it out of the Labor Committee in December, its bones and joints will one way or the other be present in the state's final Medicaid Expansion program. There is, after all, only so much variety allowed under this federally defined and subsidized program. 

It is therefore essential that our state lawmakers take seriously the criticism that, on good analytical grounds, can be directed toward the SHARE plan: it is a costly experiment that could very well come with a promise by the state to default on the very program itself; and it rests on an analytical foundation that bears more resemblance to clay feet than solid economics. No other plan will meet the criteria of being Medicaid Expansion without sharing the basic architecture with the SHARE plan, thus opening it up to the same kind of criticism.

That does not mean that there is only one, strict and narrow way to execute a Medicaid Expansion program. The U.S. Department of Health and Human Services (HHS) allows some innovation to take place, which led to two design experiments at the state level. In 2013 the HHS approved applications from Arkansas and Iowa to let eligible new enrollees use tax-paid premium assistance to buy private health insurance through the state's health insurance exchange.

The Iowa experiment was more limited, which set national focus on the Arkansas version. In an evaluation, Kaiser Health News lauded the Arkansas expansion for providing a version of Mediicaid Expansion that both Republican and Democrat lawmakers can accept. Quoting Governor Beebe, the Kaiser Health Report states that Arkansas taxpayers will save "nearly $90 million" in 2013 alone, mostly from compensation being provided for previously uncompensated care.

At this point even the staunchest opponent to tax-paid entitlements would have to admit that the Arkansas experiment has proven Medicaid Expansion a win-win. Right?

Not so fast. In September of last year the Government Accountability Office (GAO) evaluated the Arkansas experiment. Their conclusion brings us back to the tilted superbowl playing field:

In approving the demonstration [expansion in Arkansas], HHS did not ensure budget neutrality. Specifically, HHS approved a spending limit for the demonstation that was based, in part, on hypothetical costs - significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program - without requesting any data to support the state's assumption. [The GAO] estimated that, by including these costs, the 3-year, nearly $4.0 billion spending limit that HHS approved for the state's demonstration was approximately $778 million more than what the spending limit would have been it it was based on the state's actual payment rates for services provided to adult beneficiaries under the traditional Medicaid program. 

In short, the HHS effectively promised Arkansas whatever money they needed to be able to conclude that their Medicaid Expansion program had been a thundering success. 

It is good that the federal government helps states experiment with possible new entitlement programs before it simply tells states to enact them. But if those experiments are supposed to tell us anything useful, they will have to be entirely realistic representations of what the future program would actually look like. That was apparently not the case in Arkansas. 

We don't tilt the playing field in football. We should not do it in politics or public policy either. 

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Saturday, 23 September 2017
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