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FGA: State Taxpayers ‘On The Hook’ For Millions In 'Private' Option Cost Overruns

Updated: Apr 13

Our guest article yesterday from Rep. Joe Farrer revealed the unanticipated costs to Arkansas taxpayers of the Obamacare-Medicaid “private” option. In short, the program is already pricier than promised — and, despite promises that it would cost state taxpayers “nothing” in the first three years, the impact looks like it’s about to blow a hole in the state budget.

Jonathan Ingram of the Foundation for Government Accountability has released a new paper that outlines the budgetary problems Arkansas is facing — today — due to the latest set of broken promises about the “private” option:

Just two months into the program, costs have been far above the state’s initial projections. When the Private Option originally passed, consultants for the Arkansas Department of Human Services projected that the program would cost $437 per person per month in 2014. But the Division of Legislative Audit reports that the Private Option had an average monthly cost of $476.59 per person in January alone. By February, the Department of Human Services reported average monthly costs had increased to $483.15 per person.

So, who pays these excess costs? Arkansas taxpayers:

Although the state built a little wiggle room into the cap it negotiated with the federal government, the Private Option began to exceed the monthly per-enrollee cap of $477.63 in February, the second full month of the program. The waiver does provide the state an opportunity to ask for an adjustment to this cap, but this would require additional federal approval and is supposed to only be granted for mistakes in participation rates and similar factors. If February’s cost overruns continue, state taxpayers could be on the hook for millions of dollars in 2014 alone under the current terms of the waiver. If costs continue to escalate throughout the year, the state could face much higher cost overruns than these conservative estimates suggest.

This chart from the FGA outlines some projections for the new private-option taxes that Arkansans will be burdened with:

If you’re like me, you’re really confused — I thought creating a new entitlement for hundreds of thousands of Arkansans was going to save us money! And even better, we were going to make money in the first three years because of all the “free money” coming from Washington.

If you are interested in the impact of the Obamacare “private” option on our state budget, you must check out this new paper from Jonathan Ingram.

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