Federal Report Slams Obama Admin For Underestimating Cost Of Arkansas Medicaid Expansion

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Arkansas’s private-option Medicaid expansion is likely to cost federal taxpayers much more than the Obama administration promised, according to a federal report released Monday.

The General Accountability Office report castigated the Department of Health and Human Services for bucking its own rules of ensuring that Arkansas’s version of a Medicaid expansion doesn’t cost more than the traditional Obamacare Medicaid expansion would.

HHS approved an Arkansas proposal to use federal Medicaid funding to pay premiums for Medicaid customers to purchase private coverage through the state’s Obamacare exchange. The program allows those with income up to 133 percent of the federal poverty line to use the extra Medicaid funding to purchase their own coverage.

The modified Medicaid expansion program must be budget-neutral, according to HHS rules, but the department overlooked its requirements and approved a whopping $4 billion budget for the three-year program — over $778 million higher than the traditional Medicaid expansion would have cost for Arkansas, according to the GAO report.

“HHS, in effect, waived its cost-effectiveness requirement that providing premium assistance to purchase individual coverage prove comparable to the cost of providing direct coverage under the state’s Medicaid plan, further increasing the risk that the demonstration would not be budget-neutral,” the report charges.

“GAO has had long-standing concerns with HHS’s policy, process, and criteria for reviewing and approving” state waivers for Medicaid expansions with private options, especially due to “the lack of transparency in the basis for approved spending limits.” The federal agency approved Arkansas’ plan “based on hypothetical costs” and didn’t include “any data to support the state’s assumptions.” 

A hallmark of Medicaid is its low reimbursement rate, which helps state governments cut costs for the taxpayer-funded program by simply paying medical providers less than private insurance or even Medicare. The state’s private option program could easily run into cost overruns as a result.

HHS disputed the GAO’s findings.

If adopted by all 50 states, the traditional Medicaid expansion would cost federal taxpayers $172 billion by 2016, according to a White House report from July. Just 27 states have adopted some form of the expansion so far. (RELATED: White House: Red States Have Saved Federal Taxpayers $88 Billion By Rejecting Medicaid Expansion)

By the time the report was concluded, just Iowa had also been approved for a modified Medicaid expansion. The GAO noted that any cost overruns in their program will likely be less, because Iowa’s expansion only applies to those with incomes between 101 percent and 133 percent of the federal poverty level.

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