The State Where Obamacare Is Working

Arkansas managed to insure hundreds of thousands of people by expanding Medicaid. Can it be a model for the country?


Arkansas Governor Mike Beebe had a multi-tiered sort of problem: He’s a Democrat in a state controlled by a Republican legislature. In a year when states are charged with implementing a potentially life-saving provision of the healthcare law. One that is highly unpopular among many conservatives.

Arkansas has the third lowest median household income in the country—$38,413—and last year, a quarter of its adult population was uninsured. But by using federal funds made available under Obamacare, the state had the option to expand Medicaid, the government insurance program for the poor, and thus cover about 220,000 additional Arkansans.

The expansion would cost the state relatively little. It would allow poor people to see doctors, and it would reduce the amount of uncompensated care—services doctors don’t get paid for because the patient is too poor to afford the treatment. But Republican lawmakers were nonetheless wary, and the state requires a three-quarters majority for the type of bill that would authorize the expansion.

“How do you go about getting to 75% when the majority are Republicans, many of whom ran against the ideological issue of Obamacare?” Governor Beebe told me. “It was a mountain some thought couldn’t be ascended.”

First, a little background. (You can skip the next four paragraphs if the Medicaid expansion kerfuffle is old news to you.)

Medicaid is a state-based program that, before The Era of Obamacare, mostly only covered kids, moms, and pregnant women. In its original form, the Affordable Care Act hinged on a state-by-state expansion of Medicaid for people who can’t afford health insurance on the newly created exchanges (so, for people making about $15,800 a year or less). The idea was that the federal government would pay for the new Medicaid enrollees entirely until 2016, and gradually taper down the federal subsidy to 90 percent of the new costs in future years. In general, the expansion is seen as a pretty good deal for the states.

But the 2012 Supreme Court case made the expansion optional for states, throwing a wrench into the Obama administration’s plan to get all of the nation’s poor covered through Medicaid. Most estimates show that states who expand Medicaid could reduce their uninsured populations by around 50 percent or more.

So far, 24 states have opted not to expand Medicaid the way the ACA wants them to. To conservatives, their resistance is seen as a bulwark against an ever-increasing entitlement system. To liberals, it’s viewed largely as, well, a middle finger to the Obama administration: Most of the states have Republican governors or predominantly Republican legislatures, and even though the expansion would be largely paid for by the federal government, accepting it could seem like an acknowledgement of the healthcare law’s legitimacy.

Now, nearly eight million people are left without health coverage because they live in these non-expanding states, and it’s an especially heavy burden on large cities, which are home to a disproportionate share of uninsured, indigent people, as my colleague Emily Badger reported.

The New York Times recently reported on Willie Charles Carter, a Mississippi man who doesn’t qualify for the state’s Medicaid program because he has no dependent children. The free clinic where he goes for medical care is scheduled to close soon due to lack of funding, and this is his strategy for getting healthcare after that point:

“I’m scared all the time,” he said. “I just walk around here with faith in God to take care of me.”

To make matters even more depressing and racially thorny, almost every state in the Deep South rejected the expansion, as this map of states that aren’t doing the expansion, based on estimates from late last month, from the Advisory Board Company, shows.

Advisory Board Company

But eventually, Arkansas found a way.

There’s one thing the state’s Republicans are fans of, and that’s private enterprise. So earlier this year Beebe called Health and Human Services Secretary Kathleen Sebelius and asked for a special favor. In late September, it was granted: Arkansas got a waiver to use the federal Medicaid money to buy private insurance for the people who would otherwise have been eligible for the Medicaid expansion. The state’s legislature had approved this “private option” earlier this year.

Medicaid not only improves health, but also practically eliminates the risk of catastrophic medical expenses from accidents or life-threatening illnesses, so this is good news to low-income Arkansas who would otherwise have been left behind by Obamacare.

Basically, Arkansas won the Chopped challenge of public healthcare problems: Taking a basket of things that totally don’t go together, like marshmallows (government entitlements) and fish heads (Republicans) and making a reasonable appetizer (health insurance for the poor) out of it.

Beebe said the ultimate argument was that the Medicaid expansion would grant an escape hatch to Arkansan small businesses, who would otherwise be on the hook for either offering health insurance to their employees or paying a fine.

And conservative lawmakers were able to score one for private companies, as well.

“We felt getting people off of the government program onto private insurance is better for the state, the providers, and most importantly, for the consumer,” Arkansas house speaker Davy Carter told me. “The private sector has the ability to provide coverage plans structured in a way that encourages the right behavior by the consumer and rewards positive outcomes from the provider.”

Sure, this isn’t the way it was supposed to work, and in some cases the private plans can be skimpier or more expensive than Medicaid. Still, Arkansas’ story is pretty remarkable.

Republican governors in at least two other states have said they’re interested in pursuing a similar strategy, which could help chip away at some of those uninsured, indigent eight million.

Michigan, for example, has also implemented its own version of Medicaid with yet another type of waiver, one that allows the state to require the new Medicaid recipients to pay income-based premiums. Iowa is pursuing a similar tactic. While these models aren’t perfect—it’s still really hard for people with incomes this low to pay for health coverage—it’s better than leaving the uninsured to simply pray for good health, as Carter put it.

Second, this private option comes close to achieving something that even Obamacare opponents seem to want from the insurance market: Greater competition among insurance companies with the goal of driving down rates and improving coverage.

“[Arkansas] saw this as a way of developing a much more competitive private insurance market than they have,” John Holahan, who researches Medicaid at the Urban Institute's Health Policy Center, said. “The market there is dominated by Blue Cross, and this way other plans could come in and compete with Blue Cross.”

Lastly, this is a pretty perfect example of how important the semantics of Obamacare have become to its implementation. Simply substituting a private program for a public one made the Arkansas Medicaid expansion acceptable to that state’s Obamacare opponents, even though it uses the same federal funds. Meanwhile, people still find the “Affordable Care Act” more palatable than “Obamacare.”

The rollout of the Web-based exchange marketplace has been a downright disaster, and the fact that Arkansas will now effectively push more low-income individuals toward these exchanges may not, in the end, be a good thing. But given the Sisyphean IT task that fixing appears to be, it’s refreshing that at least in one state, a major ACA provision has moved forward with little more than some basic compromise and message-management.