Saturday, March 23, 2013

The Arkansas Compromise: New life for Medicaid Expansion

No, that is not a mistake in the title, although if you google Arkansas Compromise many of the results have to do with the Missouri Compromise.

The Arkansas compromise on the Medicaid expansion under Obamacare (happy 3rd birthday by the way) is discussed here.  What a neat idea -- my hat off to Gov. Mike Beebe of Arkansas.  Most state Medicaid programs are run by the state, and you can imagine how efficient and consumer-friendly that is.  Even more important, most state Medicaid programs pay suppliers much lower than private insurers and Medicare.  The Arkansas compromise will allow the state to expand its Medicaid program by simply pushing low income people onto the Arkansas health exchanges and subsidizing their purchase of insurance.  This is precisely how non-Medicaid individuals will buy health insurance once the exchanges get going in all states.  What could be easier?

The winners from this compromise are several --if it were to expand to other states.  The insurance companies gain, as they have more customers for their exchange-based products.  This might be offset a bit by the loss of business from states who were subcontracting their Medicaid business directly to one insurer.  Hospitals and other health care suppliers are huge beneficiaries, as the insurers' reimbursement for exchange-based insurance will generally be much higher than states' Medicaid reimbursement rates. For hospitals this is very important.  Medicaid beneficiaries most likely gain, as exchange-based insurance is almost certain to be better than Medicaid, with perhaps the exception that there could be some copays and deductibles with exchange insurance (unless Federal rules will prohibit that).  And more providers will be willing to accept Medicaid patients under this compromise.

So who loses?

The general taxpayer, of course.  The higher reimbursements to providers will definitely increase the cost of expanding Medicaid.  If this takes off, the Congressional Budget Office will have to redo its budget forecasts...

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