The Arkansas private option could be in trouble 1 of 6

Here we go again.

Last year, the news in Arkansas was dominated by months of tense debate over health care reform and a major decision for the state. With key provisions of the federal Affordable Care Act set to go into effect in 2014, should the state accept billions of dollars of federal money in order to expand eligibility for the Medicaid program for low-income Arkansans?

Given the strong anti-Obamacare tenor of a campaign that swept in a new Republican majority in the Arkansas General Assembly, the prospects for expansion seemed dicey, if not impossible.

The drama took an unexpected turn in late February when the feds gave the state permission to pursue a unique approach, which became known as the “private option.” Arkansas would use Medicaid funds to purchase private health-insurance plans for low-income residents. Republicans took ownership of the new plan, and after a protracted battle at the Capitol, it eventually passed with a bipartisan supermajority in both houses, with Gov. Mike Beebe signing it into law in April.


For Republican backers of the plan like Sen. David Sanders (R-Little Rock), the private option is “innovative, pioneering and transformative.” The idea of a conservative version of Medicaid expansion received national attention as well; in recent testimony before the legislature, former Bush administration Health Secretary Michael Leavitt applauded the effort underway: “You couldn’t get the federal government to do this countrywide. But you can do it in Arkansas. And when you do, others will follow.” But for some conservatives, the plan was a betrayal, relying on an increase in government spending granted by the hated Obamacare. The split within the Republican Party in Arkansas (what Rep. Joe Farrer [R-Austin] calls “the conservatives and the real conservatives”) remains raw.

Coverage under the private option just started on Jan. 1, and — even as enrollment in the new marketplaces created by the federal ACA has faced massive hiccups — the implementation of the private option in Arkansas has been going as well as proponents could have hoped, with around 100,000 gaining coverage thus far.


Just as the private option is getting off the ground, its future appears to be in serious jeopardy in the fiscal session of the General Assembly, which begins Feb. 10. In order to continue the policy past the end of the fiscal year this summer, three-fourths of both houses of the legislature must once again approve the appropriation to accept the federal money that funds it. The rump group of Republicans who opposed the policy are gearing up for another fight, and the path to another supermajority is uncertain at best. Rep. Nate Bell (R-Mena), who opposes the private option, said that there was “no question” that as of now, there are enough votes to block the funding. “I think anybody in the Capitol building would agree with that,” he said.

The private option passed last year with one vote to spare in the Senate, but one of the yes votes, Sen. Paul Bookout (D-Jonesboro), resigned in August after a scandal over misuse of campaign funds. In the special election held in mid-January to take his place, Republican John Cooper — who campaigned explicitly on fervent opposition to the private option — easily won the seat by more than a thousand votes. All of a sudden, the margin for error was reduced to zero.

That same week, in an interview with the Times, Sen. Missy Irvin (R-Mountain View) said she was unhappy with the private option and “right now I cannot support it.” A few days later, she released a statement with even stronger language: “I am opposed to moving forward and will not vote to fund the appropriation for the private option.”

Heading into the fiscal session, that leaves the Senate one vote short. Sen. Linda Chesterfield (D-Little Rock) declared in a recent committee meeting that the private option was “on life support.”


Still, many Republican and Democratic lawmakers supportive of the policy, while acknowledging the uphill battle ahead, express confidence that they can find a way forward to gather the support to continue the policy. “We had great collaboration with Democrats and Republicans [last year],” said Keith Ingram of West Memphis, the Democratic minority leader in the Senate. “We found a way to reach across the aisle. That is so different than what’s going on with Washington. I think people applaud that. … I feel like in some way, shape or form, we’ll find a way to get it done during the fiscal session.”

“At the end of the day, I think once we go through this process again that we’ll pass it because it continues to make sense to pass it,” said House Speaker Davy Carter (R-Cabot).

The private option brings in billions of federal dollars into the state economy, saves the state more than $600 million over 10 years according to an independent actuarial report, and provides a lifeline to local hospitals absorbing the ACA’s Medicare reimbursement cuts. That’s not to mention the 100,000 (and counting) Arkansans who have gained health coverage under the private option who would lose it in July if the state defunds the policy.

In short, the policy stakes — for Arkansas and for the future of health care reform nationally — are enormous. But the supermajority requirement means that just nine lawmakers in the Senate, or 26 in the House, could block the appropriation and bring the policy to a screeching halt.

In the coming months, there will be endless arguments at the Capitol and in the media over policy nuts and bolts, but this vital question will now come down to a scattering of Arkansas lawmakers, folks from all over the state elected to a part-time job. It will come down to personalities and individual preferences. And politics, of course. The future of the private option is in their hands.

Counting votes

Missy Irvin objects to the notion that she is the key swing vote. “I’m not the only person making these determinations or these votes,” she said. “There are 100 members in the House and 35 in the Senate. The notion that so much comes down to me is ludicrous in my opinion. It really doesn’t.”

Her protestations notwithstanding, Irvin will inevitably attract attention as the one senator who has publicly flipped from a yes to a no, making her, for now, the deciding vote that would block the appropriation.

If Irvin won’t budge, the path forward in the Senate becomes extremely hazy. Several lawmakers and others close to the process told me that there were a few senators who voted no last time who could possibly be convinced to vote for the appropriation this time if Irvin is lost for good. But given the makeup of the small group of hardcore no votes, flipping any of them will be a very tall order (see sidebar for more). Senate President Pro Tem Michael Lamoureux (R-Russellville), who supports the private option, said he has been doing due diligence and touching base with the no votes but “there just doesn’t seem to be a lot of room for negotiation.”


“I don’t want to speak for individual members, but I’ve always said that it was very unlikely, if not impossible, that a senator who voted no was going to switch to yes,” Lamoureux said. “Basically, we need the same 27 people to vote yes.”

One thing to note: Irvin went back and forth last session multiple times, eventually voting for the appropriation after getting a few last-minute amendments she requested. Reading between the lines in her statements, it’s possible to imagine a path by which she could support the appropriation again this time in the end. Her two chief complaints — Blue Cross Blue Shield’s reimbursement cut to specialists and her belief that there has not been enough progress and clarity on the Health Savings Account set to go into effect in 2015 — both could be resolved by the time she faces a vote.

While the spotlight is pointed on Irvin, she is certainly right that she’s not the only legislator vote-counters will be monitoring closely. Our sidebar takes a detailed look at possible swing votes, in the Senate and in the House, where the appropriation reached the supermajority threshold by just two votes. The fiscal session will likely see a repeat of last year’s roller-coaster, with many lawmakers on the fence until the last minute, or changing sides too rapidly for anyone to keep track (“like nailing Jell-O to a wall,” the saying went), and both sides engaging in a fierce battle to hold the ones they have and flip the ones they don’t.

Republican primaries in Arkansas have lately turned into who-hates-Obamacare-more competitions, and with the filing deadline approaching, politics will come into play. Irvin is one of a number of Republican incumbents likely to face a primary challenger who will make their private option vote an issue.

Rep. Justin Harris (R-West Fork), a private-option opponent, described the appropriation this year as a “no-go” and said, “I don’t think we’re going to have to flip anyone. I think they’ve already made their decision to go ahead and vote no. I think they realize it wasn’t a good thing.” That said, Harris added, “We’ve seen a lot of deal-making before. If I was a betting person right now I would not bet what’s going to happen.”

Proponents of the policy say they’ll focus on the data now available about the private-option implementation.

“What has happened before this point in terms of people assessing the private option has been abstract,” Sanders said. “Now we’re actually starting to see real operational, functional aspects that are pretty significant.”

The costs of the private option thus far are in line with the actuarial projections produced during the original debate, Sanders noted, and the enrollees are leaning younger than the population in the rest of the marketplace.

“Because of the private option, I think we’ll be the only state that hits our targets in terms of a young, healthy population enrolling,” said Rep. John Burris, another key Republican backer of the plan. “That’s significant long term in terms of keeping premiums low for all Arkansans and attracting more carriers to the market.”

“The governor has said all along, the facts of this and what it does for the state are pretty indisputable and that continues to be the case,” said Matt DeCample, spokesman for Gov. Mike Beebe. “We’re on a lot more steady ground than we were last time around because everything is in place. It’s doing what we said it could do for the state. There’s more real information, real people, real results to show.”

While the focus naturally falls on Republican swing votes, the private option was only possible with Democrats voting as a block in favor of the policy. Both Senate Minority Leader Ingram and House Minority Leader Greg Leding (D-Fayetteville) said that they expected Democrats to continue to support the private option. “We have some members who have questions about the way some of the things have unfolded,” Leding said. “But I believe that when it comes time to vote we will all be on board.”

Leding said that last year, Democratic legislators made a strategic decision to remain relatively quiet as the internal debate within the Republican Party unfolded. “This time around, I don’t want to be that quiet again,” Leding said. “We have about 100,000 Arkansans out there that now have health insurance and are counting on it, and I really don’t want to stand by quietly while people debate the possibility of taking that away.”

‘We have no say-so’

“Right now the biggest obstacle is the Blue Cross Blue Shield issue,” Leding said.

Blue Cross, by far the largest health insurance carrier in the state, cut its reimbursement rate to specialist doctors by 15 percent for patients on the Arkansas Health Insurance Marketplace, which includes the private-option beneficiaries.

This move angered the specialists — singling them out for a particular cut was an unprecedented and unfair maneuver, they argue. Lawmakers have taken note. “I can assure you that if you’re not involved, you might ought to be,” Sen. Jason Rapert (R-Conway), who voted for the private option last year, told DHS officials in a recent legislative meeting. “Because it has become a critical issue and a critical one for me.”

Here’s the thorny part for private-option proponents: Blue Cross’s controversial decision is only tangentially connected to the private option itself, and ultimately is an issue that state lawmakers and officials don’t have much direct control over. Any attempt at a legislative fix would amount to the state enforcing price controls on a private company.

“I don’t think anyone wants to go there,” Leding said. Lamoureux agreed: “I’m not in the business of setting the prices of milk or bread or health care and I wouldn’t know how to do it if I was.”

Instead, lawmakers are hoping that Blue Cross can come to an agreement through ongoing talks with specialists and lawmakers.

“We are offering a statewide product at the lowest rate,” Blue Cross spokesperson Max Greenwood said. “That was one of the elements that was used to price the products. We’ve been asked to have discussions about it and we are listening to people’s concerns.” Greenwood declined to speculate on possible adjustments to the fee schedule.

Rep. Deborah Ferguson (D-West Memphis), whose husband is a radiologist, has been one of the lawmakers raising vocal objections. “I think Blue Cross will be reasonable in the end,” she said. “I think they realize they’re putting the private option at risk.” Ferguson said she was undecided about how she would vote on the private option if a resolution over the Blue Cross reimbursement issue could not be found.

“Unlike Medicaid, where we have some legislative oversight, we really don’t have any legislative oversight with their reimbursement,” Ferguson said. “We can complain and make suggestions, but in terms of having any legal authority, we don’t. I would hope because Blue Cross is 80 or 85 percent of the market that they would listen to legislators’ concerns. Unfortunately, the only hammer we have is to not vote for the private option.”

Greenwood objected to linking the private-option vote to the specialist cuts. “Nearly 100,000 Arkansans now have access to health care that otherwise didn’t,” she said. “That to me is the issue. With regard to our reimbursement schedule, are you willing to take away coverage for this population based on a reimbursement schedule that still compensates specialists twice as much as primary care doctors overall even under the new schedule?”

Rep. Steve Magie (D-Conway), an ophthalmologist, is one of the legislators involved in talks with Blue Cross. “They were under the gun to put a product out there for the marketplace, and they made a decision that was really unfair between physician groups,” Magie said. It might be difficult in practice to amend the contracts already in place this year, Magie said, but “if [Blue Cross said] we’ll see actuarially what we need to do and change it for the 2015 year, I think people would understand that.”

Magie said that it was a good sign that Blue Cross made an offer during negotiations to allow specialists to opt out of accepting Blue Cross members on the Health Insurance Marketplace at the lower rate while still seeing other Blue Cross members.

Regardless of what happens with the negotiations, Magie will not revoke his support for the private option. “The bottom line is, if you vote down the private option, you’re penalizing the most vulnerable segment of our population,” he said. “I can’t do that. … That’s not the right thing to do.”

This issue hits close to home for Irvin, whose father is an orthopedic surgeon (her husband is a family practitioner who wouldn’t be impacted by these cuts, but Irvin has been outspoken throughout the private-option debate about protecting reimbursement rates for all providers).

“Obviously we do not have the ability to affect that policy decision that Blue Cross has made,” Irvin said. “As we move forward, how are we going to deal with that? Yes, they’re a private company, but they’re receiving taxpayer dollars. I’m elected to make sure that taxpayer dollars are being spent wisely and correctly. … In effect, you can’t necessarily just hand the keys over to private industry. … They make policy decisions and we have no say-so in it. That’s a little bit problematic, for not just me but for a lot of folks on the other side of the aisle.”

Irvin doesn’t quite come out and say that the state should be in control of the reimbursement rates, but that seems to be the implication. That’s more than a little ironic given that Irvin is now an ally of the opponents of coverage expansion, who ostensibly want less government involvement in health care.

The debate over health care reform is often cast as an ideological struggle, but it’s just as often a political battle in which current stakeholders seek to protect their own interests. While private-option proponents may hope that Blue Cross will make adjustments to appease Irvin and company, some may be uneasy with the political muscle being flexed by the providers. After all, the private option was supposed to control costs by encouraging private carriers to innovate and compete. If carriers have politicians looking over their shoulder, some might ask, what’s the point of the private option?

‘Tweaks and adjustments’

“I think it needs fixing,” said Rep. John Hutchison (R-Harrisburg), who voted for the private-option appropriation last year. “It needs tweaking. At this point, I cannot vote for it, because it’s not structured right.”

A common sentiment among Republican lawmakers — not just those who supported the policy, but even those who voted against the appropriation last year — is that their support in the fiscal session is contingent on “tweaks and adjustments” to the private option, though most were unwilling to get into specifics about what sorts of changes they were hoping for.

“There’s no doubt that the private option emerges from this fiscal session looking somewhat different,” Nate Bell said. “The question becomes — can there be a point found where everybody can agree that this is how we move forward. … We can get in a big standoff and nobody wins. So my whole goal is to sit down — and I’ve been doing this for several months now — sit down with people on both sides of this thing and say, OK, what’s the wish list look like. … It’s certainly not something we’re going to float out to the public yet, but there’s several drafts floating around, seeing if there can be some agreement.”

The key Republican backers of the private option say they encourage new ideas for how to shape it going forward. “I’m in receiving mode,” Burris said. “A lot of people that were opposed have some really good ideas for how to make this even better policy.”

“We haven’t heard anything specific,” DeCample said. “That’s not something we’re examining or initiating ourselves, but the governor has always said he’ll sit down and talk to anyone.”

DHS spokesperson Amy Webb said the agency is “open to discussing tweaks, so long as we protect the integrity of the law and what it was designed to do.”

It would theoretically be possible to amend the law itself (with two-thirds approval in both houses, the constitution allows the legislature to take up non-appropriation legislation during the fiscal session). Far more likely is special language tied to the appropriation, tying up the funds if certain criteria weren’t met by next fiscal year.

What might the tweaks include? Some of it may come down to creating clearer language and a specific timetable for some features already mentioned in the law. DHS is planning during the session to send a request to the feds to offer health savings accounts (a pet issue for Irvin, not to mention Sanders and many other Republicans) to private-option beneficiaries starting in 2015. Republicans could make the appropriation contingent on federal approval. Similarly, there may be a request for cost-sharing or small co-pays for some private-option beneficiaries below the poverty line. Again, this is in the law, but Republicans are eager for specifics and progress. “It’s a fair concern,” Burris said. “People want assurance that we’re on the path we need to be on with those things.”

Another likely request: a waiver of the requirement that the state pick up the tab for non-emergency medical transportation, a benefit under Medicaid not covered by private plans. Iowa, which is pursuing a similar privatized version of Medicaid expansion, recently got a one-year waiver on providing this “wraparound benefit” from the feds.

All of these would fall under the category of “making Medicaid more Republican,” as the Washington Post’s Sarah Kliff put it, noting that the Obama administration’s desire to get red states to agree to Medicaid expansion has opened the door for conservative reforms.

That said, these are likely the sorts of changes — making implicit portions of the law more explicit, attaching firm deadlines, following the lead of other states using a similar approach — that Democrats can live with, though they will be on guard against anything that chips away too much at the spirit of the coverage expansion.

“It is something we’re going to have to watch closely,” Leding said. “We can’t necessarily just take the 48 Democrat votes for granted. I don’t know where that line would be but I suspect if it was changed too much, it might become unpalatable for some of us. And then we’re in a very difficult position.”

Another issue that may come up in negotiations: federal grant money for outreach, such as advertisements and the trained guides who help with enrollment on the newly created Marketplace. Some of these funds have already been blocked by Legislative Council, and the outreach money is technically geared not toward the private option, but the rest of the Marketplace. The give here would be a conditional surrender of sorts for Democrats; Arkansas would have near-universal coverage available but no outreach budget to spread the word and facilitate enrollment. While lower enrollment in the Marketplace could lead to higher premiums, opposition to outreach has become an important anti-Obamacare symbol for many Republicans. As one lawmaker put it, he might be open to giving the private option a chance, but he didn’t want to have to see “Obamacare ads” during the Super Bowl.

Part of the reason someone like Bell — who would prefer to do away with the private option altogether — is willing to negotiate is the lack of a clear endgame to a pure defund strategy during this fiscal session.

“I think it’s fair to say I’ve pushed my no button more than anyone,” Bell said. “But I’m only going to vote no when I can accomplish something by voting no. … So many people believe that because you have the votes to beat an appropriation, you can actually accomplish something, and that’s just not the case. … At the end of the day, it’s in the best interests of the state if we can move away from [the private option]. But completely moving away from it in a fiscal session with the divided opinions that we have in the legislature is simply not possible.”

No one is quite sure how things would play out if the appropriation can’t muster the votes. For one thing, the underlying law redefining Medicaid eligibility would still be on the books (it’s hard to imagine that private-option opponents would be able to get the two-thirds they would need to take up a legislative change, or even the simple majority they would need to change the law), raising all sorts of open questions. The entire state budget would also need to be renegotiated on the fly, since eliminating the private option would leave an $89 million shortfall next fiscal year, according to the Department of Finance and Administration.

More simply, if the appropriation fails, would private-option opponents have the votes to refer it back to committee? To amend it on the floor? This gets back to Bell’s point — a minority of lawmakers could block an appropriation but, facing a motivated opposition, they wouldn’t even be close to having the votes to pass something in its place. That conceivably could put the Medicaid budget, or even the entire DHS budget, in limbo.

“Then you’re just at a standstill,” Burris said. “And then you’re in to the question of who gets the blame. I don’t know. But I just know that it’s not a situation we want to find ourselves in. I think a lot of Republicans wisely want to avoid it.”

That’s certainly not to say that these various procedural hurdles are insurmountable for those dead set on stopping the private option, but things would get very messy and complicated very quickly.

Farrer has said he would be willing to hold up the entire DHS budget into the summer if that’s what it took to stop the private option.

Leding said, “I know we’ve had a few members come out and say they’d be willing to stand in front of that particular train but I don’t see anybody casting that vote.”

“That is not in the best interests of Arkansas,” Bell said. “I didn’t come here to burn the house down just to make a point.”

***

Is Sen. Chesterfield right? Is the private option “on life support”? That’s probably a fair assessment at this point, though there were times when that was true last year, too.

“I always have faith in the process,” Burris said. “I don’t say that lightly. The legislature has a remarkable way of working itself out. I’ve got faith that the right outcome will prevail. And that could very well be changes and compromises that are necessary to create the best policy.”

The private option still has many powerful state interests and talented political operators pushing it ahead. The logistical complications in the way of fully defunding it this year are real.

On the other hand, never underestimate the political power in Arkansas of proving that you hate Obamacare more than the next guy. Mileage will vary on whether the private option is an innovative conservative reform or a sellout to Obamacare, but enough GOP primary voters believe the latter to scare the pants off of Republican politicians.

Moreover, the math on a three-fourths threshold will always be tough. Some lawmakers on both sides of the aisle have expressed concern about the precedent of what amounts to demanding an annual supermajority to support the policy itself. Traditionally lawmakers have been willing to approve an appropriation even if they didn’t agree with everything in it; a few Republicans pointed out that while Democrats voted in block against Voter ID, they still voted for the Secretary of State’s appropriation that spent a quarter-million dollars to implement it. The need for an annual supermajority for the private option in particular means that the policy will always be in danger, and it means — as we’re already seeing — tight margins that give enormous political leverage for individual lawmakers and special interests.

DHS spokesperson Webb said the agency has begun having conversations about the defunding scenario. “We have to know what the implications are,” she said. The ripple effects on the Medicaid program, the insurance Marketplace, various state agencies and municipalities, and hospitals across the state would be immense.

And tens of thousands of letters would go out, to the people who had gained coverage in January, informing them that it would come to an end on June 30.

“In terms of that aspect of it, it’s that simple,” Webb said. “We inform folks that this program ends, we have no additional funding for it.”

If the private option is to survive, not just this year but in the years to come, perhaps it will be because lawmakers are unwilling to send those letters.

Asked about the people who would lose coverage without the private option, Rep. Stephanie Malone (R-Fort Smith), who supported the appropriation last time but describes herself as on the fence now, said, “That’s something we’d have to figure out a way to fix. That’s a strong reason — to the people against it, if you’re opposed to it, then bring me a solution to that.”