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The Legislature’s Plan to Lock Arkansans Into Poverty

Updated: Apr 13

The thinkers at Advance Arkansas Institute have released a new paper entitled, “How Medicaid Expansion (and the “Private Option”) Will Lock Its Clients Into Poverty.” The paper examines, among other things, how the healthcare plan being pushed through the legislature will trap the poor:

Employers create jobs, and employers hire employees. The expansion of Medicaid will create large incentives for businesses both to reduce the work hours of their employees and to split full-time jobs into part-time jobs. As a general matter, low-wage employees under Medicaid expansion will lose coverage as their wages rise. For instance, a $7.50/hour wage-earner can stay on Medicaid if he or she works less than 42 hours a week; however, any material salary increase will disqualify that worker from Medicaid eligibility rapidly…

Under Medicaid expansion, employees who earn too much money – or who work too many hours – face a set of unpleasant choices. They can quit. They can work fewer hours. They can decline raises. Realistically, a large number of employees who face such choices will opt to preserve Medicaid coverage by reducing the hours they legally work.

Additionally, supporters of the “private option” have made a stunning admission: their plan will encourage employers to dump more people onto the healthcare exchanges.

Yesterday, columnist Jason Tolbert announced that he supports Medicaid expansion, in part because he wants Arkansas employers to avoid about $35 million in penalties that they would have to pay for uninsured workers who would otherwise qualify for Medicaid. Supporters of Medicaid expansion who rely on this argument have made a remarkable admission: namely, that whether we call this the private option or not, supporters of Medicaid expansion advocate changes to the Arkansas economy which will lock large numbers of poor people into part-time, low-wage jobs.

Employer avoidance of Obamacare penalties under Medicaid expansion will create a two-tier economy in Arkansas; to put it another way, there will be a “hole in the ground” between low-wage jobs and high-wage jobs that workers will only be able to cross with great difficulty. It will be highly unusual for low-wage employees to leave Medicaid coverage and, instead, receive coverage from their employers. What employer wants to shoulder an additional 9 to 14 percent increase in labor costs, while getting nothing in return?

The author, AAI President Dan Greenberg, says the expansion would make Arkansas’s economy begin to look like the struggling economies of Europe.

The House plans to vote today on the funding for the “private option” (read their bill here). It will require a 3/4ths super-majority to pass. We will keep you posted on developments.

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