Wednesday, March 18, 2015

GAO: Arkansas Medicaid experiment costs nearly an extra billion dollars.

The Government Accountability Office (GAO) reported last August that Arkansas's little experiment in paying for private insurance with Medicaid dollars cost $778 million more than if it had just stuck to using a "traditional Medicaid program".  The introduction to the GAO report states:

Section 1115 of the Social Security Act authorizes the Secretary of the Department of Health and Human Services (HHS) to waive certain federal Medicaid requirements and allow costs that would not otherwise be eligible for federal matching funds for demonstration projects that promote the objectives of the Medicaid program.  A significant and growing portion of federal Medicaid expenditures, which totaled $265 billion in fiscal year 2013, is for care provided under section 1115 demonstrations, which allow states to test and evaluate new approaches for delivering and financing Medicaid services.  Under the Patient Protection and Affordable Care Act (PPACA), states may opt to expand their Medicaid programs by covering adults with incomes at or below 133 percent of the federal poverty level (FPL) under their state plan. In August 2013, Arkansas proposed an unprecedented alternative to this expansion under the authority of a section 1115 demonstration. In September 2013, HHS approved Arkansas’s demonstration proposal to expand its program by allowing federal Medicaid funds to be used to provide premium assistance to enable newly eligible beneficiaries to purchase private insurance offered through the state’s health insurance exchange. state of Arkansas, is the first of its kind testing the use of premium assistance in purchasing exchange coverage for a state’s entire Medicaid expansion population. ....

HHS’s approval of $778 million dollars of hypothetical costs in the Arkansas demonstration spending limit and the department’s waiver of its cost-effectiveness requirement is further evidence of our long-standing concerns that HHS is approving demonstrations that may not be budget-neutral.... (Translation: It costs more money.)
The summary states:

In approving the demonstration, HHS did not ensure that the demonstration would be budget- neutral—that is, that the federal government would spend no more under the state’s demonstration than it would have spent without the demonstration. Specifically, HHS approved a spending limit for the demonstration 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 from the state to support the state’s assumptions. 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 if it was based on the state’s actual payment rates for services under the traditional Medicaid program....

Forbes reported  in October:

Credit: Forbes
 As we have written before, Arkansas’ “Private Option” ObamaCare Medicaid expansion has been a disaster for taxpayers, patients and politicians alike. Costs have run over budget every single month since the program’s launch. The Medicaid director who spearheaded the program abruptly resigned to “pursue other opportunities.” The program’s chief legislative architect, a three-term Republican state representative, lost his primary for an open Senate seat to a political newcomer, despite a significant fundraising advantage. And it’s a disaster for patients as well: the ObamaCare expansion plan is already prioritizing coverage for able-bodied adults over care for truly needy patients like Chloe Jones.

News is so bad that Governor Beebe’s office is secretly trying to silence negative press about this ObamaCare experiment. And when that didn’t work, he prematurely leaked incomplete and misleading information. Now, the news for Arkansas – and indeed taxpayers everywhere – is getting even worse.

In August, the Government Accountability Office (GAO) released the findings of an internal audit conducted on Arkansas’ ObamaCare expansion.

Its conclusion?

The Obama administration violated its own budget neutrality protocols, at a cost of $778 million to federal taxpayers.

The Administration ignored the advice of its own actuaries who questioned the program’s costs. In addition, internal e-mails reveal that state officials knew the expansion would prove costly and unpredictable, but pushed forward anyway. Now Private Option costs are exploding and taxpayers everywhere are on the hook. Rest of Article. There is much more to read.
 When the Beebe administration was lobbying for an expansion of Arkansas’ fee-for-service Medicaid system in 2012 and 2013, it estimated that the monthly cost of Medicaid expansion would be $325 per person. Early estimates of the Private Option pegged monthly costs at $437 per person, a 34 percent increase over the state’s fee-for-service Medicaid estimates, even after excluding the sickest 10 percent of patients from the Private Option.
 But the state increased its monthly cost projections to $472 per person when it submitted its waiver in August 2013. By the time the federal government approved the waiver, the budget cap had increased to $477 per person. Even though these figures have pretty significant “hypothetical costs” added in, the state has still managed to run over budget with its ObamaCare expansion.

So far this year, monthly costs have averaged between $490 and $495 per person. This means that Arkansas is already significantly over its budget cap and on track to run $20 to $30 million over the cap this year.

Nearly $1 billion more for an experiment in one state. 

Remember this little Mississippi food fight over the Arkansas plan two years ago?


Anonymous said...

That is what it is supposed to do, it is called redistribution of wealth. I hope no one was duped into believing it was to improve health care.

Anonymous said...

News flash: paying private entities a profit costs more than doing it via an agency.

Compare Medicare's admin costs per dollar to Blue Cross's.

Anonymous said...

4:08 pm Do we get to include all the executive bonuses and perks? :-)

We're Screwed said...

Please define 'medicaid dollars'.

Anonymous said...

It's Hard Out Here For an Insurance Pimp. All the hos be gettin paid tho.

Anonymous said...

The Forbes article is from 2014.

Kingfish said...

No kidding. I wrote that it was published in October. I figured you and everyone else knew that was in 2014. Must lead a boring life to sit around watching this website all day waiting to play "gotcha".

Anonymous said...

Pay real close attention to our Mississippi legislature right now. There is no question that by rejecting the Medicaid expansion, Governor Bryant and his cronies cost the state of Mississippi $ 1 billion last year. And a lot of poor people with no Medicaid or insurance continue to stream into local hospitals where, by federal law, they must be treated. (There is no payment for this treatment.)

Because Governor Byant and his cronies are allergic to the word "Obamacare" and to the words "Affordable Care Act," the Mississippi Hospital Association and the Mississippi State Medical Association have been hard at work to create a program which would be a mirror of the Arkansas program. It would rely upon the "private option." And it would avoid the term "Obamacare" and thus be palatable. Look closely at these bills. They are in the session right now.

This pipe dream (by the hospital association) would be as big a disaster as Arkansas has just had and we will again be shut out of another $ 1 billion in federal Medicaid money.

The Governor is an idiot. Just bite the bullet and take the Medicaid money. The state and its poor and the hospitals would be better off.

Anonymous said...

3:38, the billion dollars did not go to poor people - it went to insurance companies, doctors, hospitals, drug companies, medical equipment suppliers, etc.

The redistribution aspect is that the Arkansas medical industry sector got $1 billion extra in federal funds that other states did not get.

Anonymous said...

@ 8:10

Are you implying that Kingfish has precognitive powers?It states that the article is from October. One would assume he meant October of last year (2014).

Or, I guess if you really believe in the powers of the kings of fish, you thought he meant October of 2015.

Impressive, either way.

Kingfish said...

To the comment I didn't approve, I know. Stay tuned. Been working on it all week.

Anonymous said...

Obama makes Jimmy Carter look like George Washington.

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