HHS breaks own rules, OKs Ark. Medicaid plan — with potentially costly results: report

The Obama administration may end up paying more than it should for Arkansas’ novel approach to Obamacare’s Medicaid expansion, government investigators said Monday in a report with implications for several states that mimicked the state’s “private-option” method.

Specifically, the Government Accountability Office estimated that the Department of Health and Human Services overlooked its own rules and approved a three-year, $4 billion spending limit for the proposal that’s $778 million higher than it would be if the state took on a traditional expansion of the health program for poor Americans.

Under HHS’ own rules, a state plan, or “demonstration,” to tweak its Medicaid program must be budget neutral, meaning the federal government should not spend more than it would have spent without the proposal.

In Arkansas’ case, “HHS did not ensure budget neutrality,” the GAO found, potentially putting federal taxpayers on the hook for the state’s decision to expand Medicaid in an unorthodox way.

Investigators said the federal agency approved the state’s plan “based on “hypothetical costs” without requesting “any data to support the state’s assumptions.”

HHS disagreed with the findings, saying the investigators relied on partial data and ignored program changes that will result from the Medicaid expansion.

The findings could reopen debate about what’s behind Obamacare’s problems.
Namely, is the administration mismanaging a flawed set of reforms, or is Republican opposition to blame for the overhaul’s issues?

The Affordable Care Act of 2010 called on states to expand Medicaid, the federal health program for the poor, to people making up to 138 percent of the federal poverty level.

The Supreme Court made the expansion optional in 2012, after the law’s opponents said states should not forfeit existing federal funds for their Medicaid programs if they refuse to augment enrollment under President Obama’s overhaul.

Yet some Republican leaders see the expansion as a bargain that will insure low-income residents and buttress their local economies. The federal government will pay for 100 percent of the expanded population in 2014-2016 before scaling back its contribution to 90 percent by 2020.

Arkansas, hoping to navigate the fragile politics of Obamacare, asked HHS last year if it could use federal funds to buy private plans for the expanded population on its new health exchange, instead of inflating traditional Medicaid.

Known as a “1115 demonstration” in HHS parlance, it was a novel compromise for a state with a Democratic governor, Mike Beebe, and a Republican-controlled legislature opposed to Obamacare.

Iowa requested a similar waiver from HHS, and several other states have followed suit or looked into the private-option method.

As of June, HHS had only approved demonstrations submitted by Arkansas and Iowa, according to the GAO.

“As with its approval of the Arkansas demonstration, HHS gave Iowa the flexibility to adjust its spending limit and waived the cost-effectiveness requirement,” the GAO noted in its report.

More than 200,000 Arkansans have signed up for coverage through the private option, and development that’s roiled the state’s closely watched Senate race between Democratic incumbent Mark Pryor and Republican Rep. Tom Cotton.

Last month, Arkansas officials boasted  residents who got covered through the Obamacare exchange — including those in the private-option — will see a net decrease of 2 percent in their health premiums for 2015.