Deconstructing HB1143

 First of all no matter what they tell you, the so-called "private option" is Medicaid Expansion.  And its not really very "private" either, unless you want to count crony capitalism as "private."   The program is administered by our Department of Human Services, run under Medicaid guidelines, and funded by public tax dollars.  How private can it be?

Here is a link to the bill itself.   At the bottom of page four and the top of page five it directs the Department of Human Services to "Submit Medicaid State Plan Amendments and Apply for any federal waivers" necessary to implement the program.   If it is not Medicaid, then why are they implementing it by amending the State's Medicaid plan?

This is simply another way to do Medicaid.  It may be a better way, or it may be a worse way, but it is misleading beyond belief to claim, as Rep. Jon Burris does in this video, that "nothing could be further from the truth" than to say this is an expansion of Medicaid.

In fact, if you go to minute 32 of the video, Rep. Nate Bell asks Burris why people in the 100%-138% category are being left "under Medicaid guidelines" for their exchange plans instead of being subject to the guidelines for the exchange that people above that income level will use.  Burris answers him, but does not challenge the premise that people in this group, participants in his mis-named "private option", are "under Medicaid guidelines."  That's because it is Medicaid, and under HB1143 more people will be on some sort of Medicaid program than ever before in our state.  That's an expansion of Medicaid by any honest reckoning.

For more information, here is a ten minute video where I explain among other things why, yes it is Medicaid Expansion, even if the rolls of the main Medicaid program are shifted into the new program under Medicaid.

OK, so what this bill does is authorize the Department of Human Services to ask the Obama administration to use Medicaid funding to pay for insurance plans instead of Medicaid paying providers directly.     You may think that having the insurance companies stand in the middle and take a cut will only increase the cost of this program compared to the present Medicaid program.

Well, maybe but maybe not.  In a real private plan insurance companies have things they can do to reduce costs so much that they add enough value to justify their cut.   If a provider has a history of unnecessary treatment to pad the bill, they can threaten to make them "out of network" and increase the co-pay that the patient must pay to use them.

What Jon Burris is trying to do is give the private insurers a chance to impose that discipline on the Medicaid system.   That's not going to happen.  He is engaging in magical thinking, which I guess was preferable to fighting the very hard fight they would have had to fight in order to stop creeping socialism rather than simply try to make it more efficient.  

If you look at the last line of page five and the first few lines of page six you will see that he specifies that co-pays can be implemented similar to private insurance plans.  The catch is one word on page 5, line 36.  It says "allowable."   That is the catch.  The Obama administration has to allow them to do everything they can do.   They are completely dependent on the good will of the Obama administration and their desire to see this Republican plan succeed better than their own model.  What do you think the odds of that are?

Oh yes, the bill says if certain waivers are not granted, then "the bill is not implemented."  But the Administration has not put all that in writing yet, and everything they have put in writing makes reference to a temporary Medicaid waiver until 2016.  And who will be determining if the waivers granted are sufficient to allow the implementation of the bill?  Why, Governor Mike Beebe's Department of Human Services of course.  What do you think they are going to say?

Look what Beebe did with the Health Care Exchanges.  He still hasn't got permission from the legislature to establish a Health Care Exchange.  He is doing all this by rules and regulations, not law.  No matter how much or how little flexibility those waivers wind up giving them, DHS is going to rule that it is enough to "implement" the plan.  And of course, even if they do give us some flexibility, nothing permits them from withdrawing permission for that flexibility later.  In fact, the whole Crony, er Private Option is on a temporary waiver that can go away in 2016 and leave us with the exact same Medicaid programs we would have had to start with.

Yes, there may be two different private plans providing something called "competition", but it won't be real competition anymore than this plan is "real" private.   The Heritage foundation used an example to illustrate this: Say the government authorized two pizza places to "compete", but their menus had to be exactly the same, their recipes had to be exactly the same, and their vendors had to be exactly the same.   They still have the form of competition, but what is removed are the means by which competition can produce value for the customer.  All that will be left is how friendly your agent is as they take their cut of the taxpayer dime.

Later on there is another provision that says that if the federal matching rate ever goes below certain levels, then the program will be terminated after 120 days.   What I found interesting is that Burris said he was called "unreasonable" for leaving this provision in the bill.   That indicates to me that, even though all the Democrats are expressing 100% confidence that the feds will keep their promises to keep paying for almost all of this, they really fear that the feds will renege.

And they should fear.   The whole premise of this plan is that we are going to keep getting all of this new money from Washington forever.  That is more magical thinking.   Washington is out of money, they are either going to break the budget or break the dollar and either way they will not be able to pay what they say they will.

That being said, the provision is worthless so long as legislators like the ones we have now are in office.  Let's say in three years the feds cut the amount they fund by 5% more than they said they would.  Are our future legislators really going to let the program expire over that five percent?  Are they going to let the media tear them up over all the people who are going to lose their insurance coverage?    No.  They are going to call a special session and find a way to change the law before the 120 days are up.  They are going to blink,  just like they did this time.    Any teeth this provision might have rests solely on the premise that some future legislature will be willing to show the strength that the present legislature did not.   More strength in fact, because it is much easier to say "no" now before dependent people get used to the program.

The insurance companies are given one tool in this plan that they might be able to use to negotiate better rates for some- that is the fact that the plan uses state coercion to force many healthy people that don't feel they need exchange products into the system.   That large pool of healthy people forced to enter against their will are pooled with the sick people and help lower the costs for them.

This part of the critique goes beyond HB1143.  When I say what I said above, I am not just referring to people who don't have health insurance, although it is absurd that Sam Walton's grandchildren are going to be forced to buy insurance or pay a tax as if they will be a burden on some emergency room somewhere.   I am talking about people who disagree with the whole idea of the state determining what type of insurance products are best for their needs.

For example, I may want a plan that has a $10,000 individual and $30,000 family deductible.   Basically, I only want a major medical policy.   I figure I can pay the rest out of pocket.  If I have a $100,000 insurance bill the hospital can get $90,000 from my insurer, and I will pay the rest out.  But President Obama and Representative Burris don't let me have that choice because plans of this sort don't count as one of the "qualified" plans.   I must take a lower deductible.   Again, the effect is to force healthy families to buy more insurance than they want or need in order to subsidize the rest.   Insurance companies love it because they have a captive audience who buy more of their product than they would choose to buy of their own free will.  

In conclusion, HB1143 is a giant gamble whose success rests on the goodwill of the Obama administration, confidence in a "private" market that is not really private, and the presence of unshakable integrity and grit in some future legislature.   I wish there were a major party who understood the message of freedom.   I wish we the people had a major party which fought for reducing government coercion in people's lives instead of simply a party which tries to make such coercion more palatable.