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The Cost Of Doing Nothing

The biggest decision facing the Arkansas Legislature in its short fiscal session that began this week is whether to continue funding Arkansas’ private option, which uses federal Medicaid funds to expand health insurance for Arkansans, but through private health insurances plans.

My position has been unwavering: The innovative plan should be continued as lawmakers consider necessary improvements along the way.

However, lawmakers could choose to scrap the plan, set aside the progress made and, instead, do nothing. In that case, Arkansas would join about 20 states, primarily with Republican controlled statehouses, that have chosen to turn the program over to the federal government at a great cost to their states.

The outcomes are not debatable.

Arkansas Republican Speaker of the House Davy Carter — a strong advocate of the private option — had a chance to look at what is happening with some of the states, including Texas, that have ignored the issue.

“Last weekend, I got up to speed on what was going on in other states that took the ‘do-nothing’ approach. In Texas, the federal government has stepped in and is running that state’s health care exchange. The local people have no control,” said Carter.

In essence, those Republican-controlled legislatures have cut off their noses to spite their faces. The anti-Obama and Obamacare mindset and the understandable attempt to fight the federal program have caused them not to stop the creation of health insurance exchanges but instead to relinquish control of them to the federal government. I think we have all seen how much poorer the federal government has been at implementing programs compared to state governments. If ever there has been a textbook case for local control, the Obamacare exchanges are it.

Perhaps some may hope that the exchanges run so poorly that the pressure mounts for Washington D.C. to repeal Obamacare. That’s a long shot, but either way it is obvious that the more involved the state is the better the system works.

But there are other consequences Carter has seen.

“Taxes and penalties will presumably be levied on their business community, and the same would have happened here had we taken the ‘do-nothing’ approach,” Carter explained. “Ironically, Gov. Perry has requested a block grant, which notably still takes money from the U.S. Treasury, from the Feds so he and the Texas legislature can deal with its state’s health needs as they see fit. Arguably, that’s what we have already done here in Arkansas with the Private Option.

“In fact, I predict that states that have taken the ‘do-nothing’ approach will ultimately seek waivers from the federal government to run their own programs and will claim victory when they do so. Make no mistake, I believe that such a claim of victory has merit, but I believe that Arkansas has paved this path. Likely some who have been very critical of the Arkansas Private Option will applaud these waiver ‘victories’ of other states as standing up against Obamacare. I look forward to listening to the reasoning behind such positions.”

These taxes and penalties Carter mentions can be a huge hit, especially to small businesses. The biggest penalty will hit businesses with 50 employees or more that fail to provide health insurance for their employees to a level that Obamacare considers adequate. The private option saves these penalties for employers whose employees fall into the population covered under the expanded coverage. The tax firm Jackson Hewitt estimated this savings to be between $27 million and $40 million in 2015. Granted, the implementation of these penalties were delayed by the federal government for 2014 but they are scheduled to go into effect in 2015 under current law.

Another cost is an economic hit to hospitals in states that have chosen not to expand. With the passage of Obamacare, it was assumed that the cost of uncompensated care would go down as an increased population had health insurance coverage through the expansion. As such, the reimbursements that hospitals get for treating the uninsured has gone down. With the expanded coverage, hospitals are still required to treat those without insurance but with lower reimbursement and without expanded coverage, they take a double hit.

So the choice facing state lawmakers is to go with a do-nothing approach that has the effect of subjecting Arkansas businesses to increased taxes and hospitals to increased costs while at the same time relinquishing additional control of the system to the federal government. Or, to continue a conservative innovative approach with the opportunity of reforming Medicaid.

It seems obvious why many conservative lawmakers believe the private option is the best approach.

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Jason Tolbert is an accountant and conservative political blogger. His blog — The Tolbert Report — is linked at ArkansasNews.com. His e-mail is jason@TolbertReport.com.

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