Politics & Policy

Medicaid Reform: Three Lessons from Arkansas

(Photo: Syda Productions/Dreamstime)
One southern state is raising the bar.

Arkansas made national headlines in 2013 when then-governor Mike Beebe, a Democrat, struck a deal to make Arkansas the first southern state to expand Medicaid through Obamacare. Shortly thereafter, Beebe exited (stage left), leaving a fiscal, political, and moral disaster for the new administration to grapple with. But now, thanks in large part to the leadership of Republican governor Asa Hutchinson, Arkansas is taking significant steps toward reversing Obamacare’s devastating impact. Other expansion states should take note.

When Hutchinson took office in early 2015, enrollment in Arkansas’s Medicaid expansion had already surpassed 250,000 able-bodied adults. More people had signed up for the program than the Beebe administration had promised would ever even be eligible. Enrollment continued to skyrocket thereafter, reaching nearly 325,000 able-bodied adults in late 2016. Costs had been significantly and consistently over budget. And nearly half of all expansion enrollees do not work at all.

Arkansas reached a tipping point in January of this year when federal funding for the expansion dropped to 95 percent, pulling 5 percent of expansion costs out of the state budget. With surging enrollment and costs, something had to be done to stop the bleeding.

So where do their efforts stand today, and what are the takeaways for policymakers? Based on Arkansas’ progress, here are three major reforms other states should pursue.

1. Implement commonsense work requirements for Medicaid-expansion enrollees.

Thanks to the leadership of Governor Hutchinson, the legislature convened for a special session in May and passed legislation that authorizes the state to seek work requirements for certain Medicaid-expansion enrollees. While some of the finer details still need to be worked out — and those details are important — this is a significant step in the right direction.

States that avoided Obamacare’s Medicaid-expansion disaster altogether made the right decision. But work requirements are an effective way to reduce enrollment and protect the truly needy in states that mistakenly expanded the program. This is critically important in a state like Arkansas, where Governor Hutchinson inherited an expansion mess from his Democratic predecessor.

States — including those who rightly declined to expand Medicaid — should pursue this commonsense reform to help as many non-disabled adults as possible regain their independence.

2. Reduce Medicaid eligibility for non-disabled, working-age adults.

Federal law sets Obamacare’s Medicaid-expansion eligibility at 138 percent of the federal poverty line for able-bodied, working-age adults. Governor Hutchinson wants to lower eligibility to the poverty line. The legislature agreed during the special session last month, and now the state will ask the feds for these changes.

In an ideal world, Arkansas would repeal the expansion entirely, but change happens incrementally, and this seemingly small change could have a big impact. State officials estimate that this eligibility reduction will help roughly 60,000 Arkansans regain their independence and leave the Medicaid program. It’s good policy for Arkansas and other states across the map.

3. Freeze Medicaid-expansion enrollment.

Arkansas pursued this commonsense reform earlier this year. Unfortunately, the bill failed in the state senate, despite flying through the house and even gaining the support of some former Democratic legislators.

But had the effort been successful, it would have had massive implications, liberating hundreds of thousands of Arkansans from welfare and freeing up limited dollars for the truly needy.

A freeze stops new applicants from enrolling in the expansion but allows existing enrollees to stay until their incomes increase. It’s one of the most effective ways to unwind welfare expansions, so it’s no wonder other states are considering an enrollment freeze right now.

States that are serious about reducing dependency and protecting the truly needy should follow Arkansas.

Other states that are struggling to pay for their out-of-control Medicaid expansions (read: all of the states that expanded Medicaid) should pursue a freeze as well.

With these reforms, Arkansas is raising the bar for Medicaid reform. States that are serious about reducing dependency and protecting the truly needy should follow suit.

HHS Secretary Tom Price has been forthcoming about his support for Medicaid work requirements and his eagerness to approve them. When Arkansas’s request reaches his desk, it may very well become the first state to ever get approval to require able-bodied adults on Medicaid to work, train, or volunteer. And for the truly needy and taxpayers everywhere, that’s really good news.


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— Nicholas Horton is a senior research fellow at the Foundation for Government Accountability.

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