Future of Arkansas Medicaid program looms with health care, budget ramifications for lawmakers, new governor

Big factors affecting Arkansas’ Medicaid program loom in the near future, and this legislative session will require clear direction on health care and fiscal policy from Governor Sarah Sanders and the new GOP majority in the state capitol.

Senator Missy Irvin, R-Mountain View, chair of the Senate Public Health Committee, discussed these ramifications in an appearance on the Capitol View program this week.

For starters, the state health care system is fragile right now. Many hospitals, particularly in rural parts of the state, are in critical condition as pandemic funding dwindles, but staff and supplies costs remain extraordinarily expensive. Federal Medicare and Medicaid reimbursement rates have been flat for years, to the point where hospital administrators say Congress needs to pass higher rates to keep up with inflation and decades of rising costs, or they’ll have no other choice than close.

“We [the state] it can change Medicaid rates, but not much,” Irvin said. “There has been a rate review that [former] Governor Hutchinson put an executive order in place, but it was systematic and we made some changes. But generally those are very tied up and stuck.

This spring, the end of the COVID-19 pandemic emergency declaration will mark a shift in a policy move that previously allowed states to automatically add Medicaid recipients. Arkansas (and other states) will “retire” continued Medicaid enrollment. That move is expected to substantially reduce the Medicaid rolls of more than one million citizens. It will also reduce the federal match rate for Medicaid in Arkansas.

“We operate Medicaid under FMAP, which is a federal medical assistance program. And so the split between state share, state revenue, and federal revenue is roughly 70/30: 70% fed, 30% state,” Irvin said. “Because of the public health emergency, that [fed contribution] it rose to about 77.51%. And so every 1% swing is about $65 million in state general revenue. So you can see that we’re actually saving a lot of money because the federal government is picking up more of the bill. This reduces the dependence on government revenues. But once the public health emergency is over, that swing goes back to that 70/30% split versus the 77% we’re getting now. So that has a lot of tax implications for how we record it and do it.

Of the more than 1 million Arkansans enrolled in Medicaid, about 477,000 are children, Irvin said. Lawmakers will need to understand the health policy side of where legitimate enrollees are directed and what the tax impact will be. From the math Irvin shared, the state could be looking at hundreds of millions of dollars in general revenue.

Expansion of Medicaid – formerly the Private Option and Arkansas Works but now called AR Home after changes made in the 2021 legislative session – will be another major headwind to health care and funding in the 94th Arkansas General Assembly. Irvin said he hasn’t had as much dialogue with Governor Sanders on this issue due to the new governor’s focus on education and criminal justice reform. Sanders has not taken a firm stand for or against Medicaid’s current expansion program.

But Medicaid expansion will need a three-quarters vote in both houses to be funded. It has historically been placed in the overall budget of the Department of Human Services, but lawmakers and former Governor Asa Hutchinson have always needed multiple tries to get the 75% pass.

Irvin said AR Home was “thoughtful, purposeful” and is improving health outcomes.

“It is health policy that has been lacking all this time to really improve health outcomes. If we don’t endorse the health outcomes, then we really need to shift gears and shift it and change it,” she said.

Irvin said parts of the revised Medicaid expansion program are helping mothers and younger children, veterans and those in foster care. Canceling AR Home will leave huge holes in health coverage across the state.

While health services and coverage are the major focus, the tax impact of eliminating or canceling AR Home Medicaid’s expansion program could leave a $1 billion hole in the state budget. With Traditional Medicaid Federal Funding Set To Fall From 77% To 70% Pandemic Level, Medicaid Expansion Under Affordable Care Act Picks Up 90% Of Health Care Bill With Arkansas Paying the remaining 10%. A reversal or closure of that program to traditional Medicaid could drop the federal contribution to the 70% level.

“It all works together,” Irvin said.

You can watch Senator Irvin’s full interview in the video below.

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