Arkansas health plan for poor to add limited federal costs: report

Arkansas governor Mike Beebe looks on during a Martin Luther King Jr. service in Little Rock, Arkansas in this January 15, 2013 Governor's office handout photo obtained by Reuters March 6, 2013.

LITTLE ROCK, Arkansas (Reuters) - A cost analysis released on Monday shows that a state plan to move Medicaid-eligible low-income citizens into a "private option" under upcoming federal healthcare exchanges would result in little additional federal costs.

"These estimates find that the private option can be fully funded with existing resources at the state level and would add less than 15 percent to federal health-care costs in Arkansas," the report said. "In some realistic scenarios, there could be no additional federal costs at all."

The report by the state Department of Human Services, with input from the Arkansas Insurance Commission and consultants, addresses concerns that private insurance would cost up to 50 percent more than standard Medicaid. A Congressional Budget Office estimate last year said Medicaid costs $6,000 per enrollee versus $9,000 for private insurance.

The Arkansas proposal, the report said, would introduce 250,000 new low-income adults into the private market, creating competition and price pressure.

The report said that by including Medicaid-funded adults in the exchange, the federal treasury would spend about $700 million less on tax subsidies in Arkansas.

Arkansas state officials have created a unique plan to expand Medicaid, spearheaded by Governor Mike Beebe, a Democrat.

The governor's proposal would expand coverage to state residents who earn up to 133 percent of the poverty line, or $15,415 per year.

The Arkansas legislature did not want to expand Medicaid for those under 133 percent of the federal poverty line, an option under the Affordable Care Act. Instead, it wanted to use billions in Medicaid funding to buy private insurance for that same population.

Under a verbal agreement with Secretary of Health Kathleen Sebelius, state officials say they could use Medicaid funds to obtain private coverage for poor adults with incomes ranging from zero to 133 percent of the federal poverty level.

The insurance would be purchased through a health insurance exchange that Washington is scheduled to begin operating with Arkansas on January 1, 2014. The online marketplace would allow people with incomes of up to 400 percent of the poverty line to obtain private coverage at federally subsidized rates.

The Arkansas deal could provide a template for other states. Ohio Governor John Kasich, a Republican, is already in talks with state legislators in Columbus about the prospects of a similar deal.

Earlier this month, hundreds of people rallied on the Arkansas state Capitol steps about Medicaid reform. Beebe said then that he and Republican lawmakers were on track to provide health coverage to more low-income Arkansans.

Conservatives like the Arkansas concept because the privatization avoids a government expansion.

Three-fourths of the state House and Senate, both of which are Republican-controlled, are needed for the package to become law.

(Additional reporting by David Morgan; Editing by Barbara Goldberg and Eric Walsh)