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Rep. Farrer: "Private" Option Costs Already Exceeding Federal Caps

Updated: Apr 13

The following is a guest article from State Representative Joe Farrer (R-Cabot):

When we passed the Private Option Medicaid expansion last year, we did so under the explicit promise that the state taxpayer would bear no costs of the Medicaid expansion for at least the first three years.

But what was promised during the legislative debate and what was negotiated between the Beebe and Obama administrations are very different.

The Obama administration capped federal Private Option funding with per-person monthly caps for each of the next three years. State taxpayers are on the hook for costs that exceed these federal caps, to be repaid at the end of the 3-year waiver window.

In the second month of the Private Option, we are already exceeding those federal caps and the state taxpayer will pay $6 to $18 million in 2014 alone as a result.

Here’s the background:

In March 2013, Optumas projected that the Private Option would cost an average of just $437 per person, per month in 2014. The Obama administration placed per-person spending federal caps at roughly $478 per person per month.

The Division of Legislative Audit reported that in January 2014, per-person costs had reached an average of roughly $477 per month, far above the initial projections and just $1 below the cap.

The fact that we were dangerously close to the federal cap after just one month was frightening enough.

That’s why I demanded detailed information about February Private Option spending from our Department of Human Services.

Now the Department of Human Service indicates that by February, the average per-person cost had increased to more than $483 per month. This means that actual costs have exceeded the Optumas projections by more than ten percent. Who is to say that this won’t get any worse in March, April or later?

The bad news is the Private Option has already exceeded the monthly cap on federal spending by $5.52 per person. If this cost overrun holds for the rest of the year (and doesn’t grow), Arkansas taxpayers could be asked to repay between $6 million and $18 million to the federal government in 2014 alone, depending on how many people sign up this year.

We already know the Private Option could cost state taxpayers a minimum of $7 million in 2014. The question is: will the Private Option overspending get even worse and end up costing state taxpayers tens of millions in 2014?

If costs continue to escalate as they have during the course of the last two months, our state taxpayers would be on the hook for even more, as the table below shows.

That’s just the bad news about 2014. 2015 could be much worse.

The Obama/Beebe federal caps only allow premium increases of 4.7 percent per year for the next three years. But our own consultants predicted average premiums in the Private Option would rise by more than 6.5 percent in 2015 and 2016. The premium increases citizens of our state have seen over the past several years make potential cost overruns even more likely.

We should not ask taxpayers to sign a blank check to create a new entitlement for able-bodied adults. It’s time we have a serious discussion on how we roll back this ObamaCare Medicaid expansion. I stand ready to vote for a clean Medicaid budget, without the Private Option, and remain committed to finding common ground on how to wind down the Medicaid expansion. To do anything else, will cost the state taxpayers millions in 2014 and could cost state taxpayers tens of millions or more in 2015 and 2016.

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