Report outlines options for curbing Arkansas' Medicaid spending

Report outlines options for curbing Arkansas' Medicaid spending
Report outlines options for curbing Arkansas' Medicaid spending

The Arkansas Department of Human Services on Friday released a 128-page report outlining a wide range of options for Medicaid that department officials said are aimed at controlling spending while maintaining or improving services.

The Medicaid Sustainability Review is posted the department's website at

"Medicaid provides health care to more than 850,000 Arkansans, and we have a responsibility to ensure that it is optimally structured and financially sustainable so that these services continue well into the future for those who rely on them," state Human Services Department Secretary Kristi Putnam said in a news release. "We appreciate the chance to discuss different paths laid out in this report and look forward to working with our many partners to determine which options make sense, and which don't."

Asked about Republican Gov. Sarah Huckabee Sanders' preference for options in the Medicaid sustainability review report, Sanders spokeswoman Alexa Henning said Friday, "The Governor will review the options detailed in the report and work with our partners in the Legislature to ensure the needs of Medicaid recipients are met while implementing efficiencies and reforms that best utilize taxpayer dollars."

DHS said it commissioned the review, which was conducted by McLean, Va.-based consulting firm Guidehouse over the past year, to identify potential ways to address concerns about a steady increase in the cost of operating the Medicaid program.

The department said it will now collect feedback from legislators, stakeholders, providers, beneficiaries, and others about the options included in the review.

The state's Medicaid program spent more than $9 billion, including state and federal funds, in the fiscal year that ended June 30, 2023, providing a wide range of health services to more than 1 million beneficiaries, according to the report.

The annual cost of the program increased by 41% between fiscal 2018 and fiscal 2023, the report said. During this period, the state's spending on Medicaid has increased from about 20% to about 23% of the state general revenue forecast, causing concern about the sustainability of the state's Medicaid program and the increasing strain on the overall state budget, according to the report.

According to the state's official forecasts, Medicaid spending from general revenue was projected to be about $1.1 billion in fiscal 2018 and $1.4 billion in fiscal 2023.

The state's total forecast general revenue in those years was about $5.5 billion and $6 billion, respectively.

The Medicaid Sustainability Review takes into account an impending decrease in the federal match rate for much of the state's Medicaid spending. The percentage of federal funds that pay for Medicaid services will fall from 72% to 71.14% on Oct. 1, which means state general revenue funding will have to pay a higher share of the cost, the department said.

The review focused on possible program modifications, but not individual provider rates, the department said.

Focus areas of the review include the state's latest version of Medicaid expansion, which is called the Arkansas Health and Opportunity for Me (ARHOME) model; Provider-Led Arkansas Shared Savings Entities, which are called PASSEs; inpatient and outpatient services; payment types, including supplemental payments, cost settlements and access payments; long-term services and supports; pharmacy benefits; non-emergency medical transportation services and more.

Each option outlined in the report includes an overview, the potential estimated cost savings, the steps and timeline to implement it and information from other states, according to the department. The options are a broad array of possible paths but are not recommendations by Guidehouse or the department, the department said. It said no determination has been made to move forward on any specific option.

The review did not cover inpatient and outside hospital services -- outside of supplemental payments, cost settlements and access payments -- as the department is exploring options related to hospitals separately, the report said.

Janet Mann, the state's Medicaid program director, said Friday that "there are things in there that will make everyone equally upset, but it is what we said we would do, which is to look at everything and give options for discussion.

"It is not an easy answer to say let's go to managed care," she said. "That comes with rules and regs and how do you deliver it?"

Keesa Smith, executive director of Arkansas Advocates for Children and Families, said Friday in a written statement, "We're just beginning to read the report and analyze the options it includes, but we want to remind decision makers about how important Medicaid is to Arkansans, not only to children, low-income families, people with disabilities and senior citizens, but also to entire communities.

"It helps support our larger health care system, even for those who don't have Medicaid coverage," she said. "It keeps access to health services available in rural communities throughout the state. Tweaks to Medicaid policy that might look good on paper can actually have a profound impact on the health of some of our most vulnerable citizens, and to health care access for all of us."

Arkansas' total Medicaid enrollment declined by about 257,000 over a six-month period through Oct. 1 to 868,059, based on DHS figures, after the state's unwinding of the continuous coverage requirement after the end of the federal public health emergency from covid-19.

The Oct. 1 Medicaid enrollment included 388,117 children, 240,519 adults in the ARHOME Medicaid expansion program and 239,423 other adults.

The state's Medicaid expansion program was first authorized by the Republican-controlled Legislature and then-Gov. Mike Beebe, a Democrat, in 2013. Different versions of the program have operated under a waiver granted under the federal Affordable Care Act. Arkansans between the ages of 19 and 64 who are not enrolled in Medicare and who earn less than 138% of the federal poverty level but more than 16% are eligible for ARHOME.

As of Feb. 1, Arkansas' Medicaid enrollment totaled 872,299, including 385,570 children, 242,988 in ARHOME and 243,740 other adults, according to the latest figures available from DHS on Friday.

The review released Friday includes seven options for the ARHOME's qualified health plan model of purchasing private health insurance for most beneficiaries, including retaining the model while strengthening controls to allow the department to better limit expenses, moving beneficiaries into traditional Medicaid managed care or eliminating the qualified health plan model and transitioning beneficiaries to the fee-for-service program.

The report also includes four options for the PASSE managed care program, including shifting the remaining long-term services and supports programs and populations, including nursing facility services, from fee-for-service into the managed care PASSE program or transitioning the long-term service supports programs and beneficiaries, excluding nursing facility services, to the PASSE program.

The Medicaid sustainability review report includes seven options for pharmacy, including pursuing value-based payment arrangements with drug manufacturers for certain high-cost drugs; standardizing pricing, rebates and policies for certain drugs that can either be self-administered or administered in an outpatient clinic; or allowing pharmacy benefit administrator dispensing of certain provider-administered medications such as implantable contraception.

The department released the report with the Arkansas General Assembly set to convene in a fiscal session starting April 10 to determine the state's general revenue budget for fiscal year 2025, which starts July 1 and ends June 30, 2025.

Mann said Friday that the overall idea is to develop a consensus on options outlined in the Medicaid sustainability report to consider during the Legislature's 2025 regular session.

"I don't know if there is any consideration for a special session," she said.

Mann noted that the ARHOME waiver with the federal government ends Dec. 31, 2026, "so that is something we have to discuss and have debated in the Legislature."

In fiscal 2025, the state Department of Human Services' proposed general revenue budget would increase by $4.4 million to $1.83 billion under the governor's proposal, including a $4.16 million increase to $28.6 million for administration. Most of that increase is from the transfer of the Temporary Assistance for Needy Families program from the state Division of Workforce Services to the state Department of Human Services, state officials said.

Department spokesman Gavin Lesnick said the department plans to use funds in the Medicaid trust fund in lieu of increases in general revenue to get through the rest of fiscal 2024 and fiscal 2025.

The projected Medicaid trust fund balance for fiscal year 2024 is $758.5 million, he said earlier this month. As for the projected fiscal year 2025 Medicaid trust fund balance, the department is still evaluating internally the impact of the post public health emergency unwind, he said.

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