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The Southern State of Arkansas is where the newest battle against ObamaCare is taking place. A strong grassroots campaign has formed to place a voter referendum on the ballot seeking to repeal the state’s recent Medicaid expansion. But the battle in Arkansas is not the traditional fight seen in other states.
Since last summer’s Supreme Court ruling in favor of ObamaCare, each state has been able to decide whether or not it wants to accept Federal funding to expand Medicaid eligibility. The Federal Government would fund 100% of the cost for the first three years, and scale down its support until it reaches 90% by 2020, leaving states to pay for the rest. But there really are no guarantees of Federal assistance after the first few years. To date, 26 states have chosen to expand Medicaid, with Arkansas being one of them.
But while many states voted to expand Medicaid eligibility, Arkansas’s Democratic Governor Mike Beebe knew he had to do something different. With a Republican-controlled House and Senate and a 3/4 majority required to pass the expansion, Governor Beebe knew conservative Republicans would not bite. Instead, he got special permission from the Department of Health and Human Services to use the Federal Medicaid dollars to subsidize the purchases of private healthcare through the insurance exchanges. Thus instead of actually expanding Medicaid, the deal technically only subsidizes private coverage, since it is currently against the law to subsidize commercial insurance for individuals who are eligible for Medicaid. This so called “private option,” was touted as saving money and providing better care.
Republicans in the legislature bought it.
While private health insurance plans through the exchanges will provide better health coverage, they will cost much more. Although the Federal Government pledges to cover the majority of the tab (for the time being), cash-strapped Arkansas will face even greater fiscal obligations under its special deal with HHS. According to the CBO, it costs 50% more to enroll individuals in health exchanges than in Medicaid (a cost increase from $6,000 to $9,000 per person). Arkansas’s share of the cost by 2022 will be $665 million.
In addition, the Arkansas deal greatly changes the purpose of Medicaid dollars. Instead of simply helping the very poor and needy (as the program is intended), Medicaid funds in Arkansas will support a much larger group of individuals. It will encourage those in a private program to switch to the more attractive public program.
While the deal could be argued to increase Arkansas’s healthcare flexibility, the feds have denied it. The Centers for Medicare and Medicaid Services declared in its “Good Friday” memo, “Under all these [premium support] arrangements, beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-sharing protections.” This is a nice way of saying that all the strings are still attached.
Arkansas’s deal opens the possibility for similar expansions in other states. As Avik Roy writes on Forbes, “now that HHS has cut this deal with Arkansas, other states will have every incentive to reopen their negotiations with HHS to ask for a similar one. Congress will need to figure out if HHS is legally authorized to spend more money in this fashion, and if so, if Congress should reduce spending elsewhere to offset it.” He also said that, “if every state sought the same deal that Arkansas has apparently achieved, ObamaCare’s costs could increase by trillions of dollars.”
To repeal this costly entitlement expansion, Arkansans Against Big Government has been formed to place a voter referendum on the ballot for the 2014 election. To succeed, the group must get at least 56,000 signatures by August 15th. Find out more at the Arkansans Against Big Government (AABG) - Referendum Campaign on FreedomConnector and Facebook.
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