Arkansas Medicaid growth rate slows to historic level

story from Talk Business, a TCW content partner

Arkansas’ Medicaid program saw a marked slowdown in spending growth compared to the previous year, and state officials said the most recently concluded fiscal year produced the lowest annual growth rate in more than three decades.

Medicaid’s preliminary actual expenditures for FY 2013 totaled $4.684 billion in federal and state funds compared to $4.615 billion in FY 2012. Medicaid hasn’t seen total program growth of less than $100 million in 14 years.

The Medicaid Trust Fund ended the fiscal year with an estimated $62 million on hand.  Previous projections suggested the fund was running at a deficit. Last November, Arkansas Department of Human Services officials warned that significant budget cuts to the Medicaid program were needed.

The roughly $68-$69 million in growth was largely attributed to costs associated with an increase in average enrollment, state officials said. They also indicated investments Medicaid made in a payment reform initiative launched last July also slowed the cost curve for the low-income health care program.

“This is wonderful news. We began the year talking about a huge shortfall that would force us to cut vital services for the elderly and reduce provider rates, neither of which we wanted to do,” said John Selig, director of the Department of Human Services, which oversees the state Medicaid program. “This gives us some breathing room as we continue to transform the health care system in Arkansas.”

Andy Allison, Arkansas Medicaid Director, said that growth slowed in most areas across the program and actually declined in some key areas, such as prescription drugs, nursing facilities and dental care. He also said reductions in spending “are historically rare and especially noteworthy given that enrollment increased,” he said.

For the better part of this calendar year, DHS officials have noted the slowing cost increases in Medicaid, but have not been able to identify with certainty the reasons for the slowdown.

“We’re cautiously optimistic about the numbers we’re seeing. They show that providers are aware of the program changes and are beginning to transform their practices,” Allison said. “It’s now critical that we continue our progress so that we can sustain the momentum.”

DHS is hopeful that as more aspects of the payment reform initiative kick in, the cost curve on existing programs may bend further.

PRIVATE OPTION FACTOR
Within the next year, aspects of the Affordable Care Act and a state “private option” health insurance program will launch in Arkansas qualifying as many as 250,000 Medicaid-eligible citizens for subsidized health insurance through a forthcoming marketplace exchange.

In late March, DHS released actuarial figures that show the private option would save an estimated $30.7 million in FY 2014, $151.3 million in FY 2015, and $176.4 million in FY 2016.

Those three years account for the federal government’s 100% commitment to fund Medicaid expansion, which Arkansas lawmakers have received permission to shift into subsidies on the exchange, which is expected to launch on Oct. 1, 2013.

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After year three, the state of Arkansas must gradually pick up the tab for a portion of the Medicaid expansion dollars, eventually a 10% cost-share by FY 2023.

Still according to DHS calculations, the state would save more than $341 million during the next four years following FY 2016 as federal money would outweigh state costs. By FY 2021, the trend would reverse as the state would be on the hook for $8.8 million, according to the actuarial analysis, followed by $9.9 million in FY 2022 and $10.8 million in FY 2023.

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