After news broke of Health and Human Services Secretary Kathleen Sebelius tentatively approving Arkansas' idea for expanding Medicaid via premium support for private health plans in an insurance exchange, some were wondering if HHS even had the legal authority to do it.
In a new FAQ on the so-called Arkansas Option, HHS explained that indeed it does: under section 1115 of the Social Security Act, "the Secretary may approve demonstration projects that she determines promote the objectives of the Medicaid program."
That latitude given, HHS said it "will consider approving a limited number of premium assistance demonstrations since their results would inform policy for the State Innovation Waivers that start in 2017."
In late February, Arkansas Governor Mike Beebe said he had been given federal permission to explore a quasi-voucher-based Medicaid expansion, with beneficiaries buying subsidized private health plans through the state-federal partnership HIX.
Sebelius and HHS have mostly been quiet about the proposal, which Arkansas lawmakers are debating. But she has been meeting with Republican governors (and conservative Democrats like Beebe) to try to find workable solutions. "I have a governor downstairs waiting in my office," Sebelius said at the HHSinnovates awards conference honoring agency start-up projects in late March. Apologizing for leaving early, she said: "These days they are my new best friends. I need to spend time with them so we get healthcare up and running."
In the FAQ, HHS said it will only consider state demonstration proposals that offer beneficiaries a choice of at least two qualified health plans, ensure health plans provide any necessary "wrap around benefits" with premium assisstance, not include certain Medicaid-eligible individuals such as the medically frail, and end no later than December 31, 2016.
In 2017, HHS will have authority to grant state innovation waivers, which "could allow a range of state-designed initiatives."
For now, HHS said it's going to consider state proposals and particularly look for evidence that the Arkansas Option could bring savings from reduced "churning," where people fall in and out of Medicaid eligibility based on fluctuating incomes, and bring more competition to exchanges.
Also, HHS noted that "a state may increase the opportunity for a successful demonstration" by targeting individuals with incomes between 100 and 133 percent of the federal povery level. Medicaid premits additional cost-sharing flexibility for individuals with incomes above 100 percent of poverty level, HHS said, and "this population is more likely to be subject to churning and would be eligible for advance premium tax credits and Marketplace coverage if a state did not expand Medicaid to 133 percent of FPL."