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Oregon Shows Costs Of Putting Medicaid Enrollees In Private Coverage

The Arkansas plan to expand Medicaid by paying for enrollees to buy private health insurance
has been billed as a new option for states led by Republicans who are leery of the federal health overhaul. And it’s getting attention from Republican leaders in Florida and Ohio, among other states.

However, the strategy is not new. Oregon has been using this model for more than a decade — with mixed results.

The Oregon Family Health Insurance Assistance Program, which has used Medicaid money to enroll people in private individual coverage, had 18,000 people signed up at its peak in 2007. The program is being phased out as the health law’s marketplaces are ramped up.

Private and federal government reports on the program paint a mixed picture:

— Enrollees have a wider choice of providers than in traditional Medicaid.

— Some benefits, such as dental and vision care, are not included, even though the traditional Medicaid program provides some of that coverage.

–Because of limited funding, the state held down enrollment. In 2007, the program had a wait list of 7,000 people.

— The private insurers have higher deductibles and co-pays than traditional Medicaid, which means beneficiaries have larger out-of-pocket costs. As a result, some people report going without necessary health care, or delaying care until they could afford the cost-sharing.

The Oregon program subsidized up to 95 percent of the private insurance premiums for people making below 150 percent of the the federal poverty level (FPL), or $17,235 for an individual.  The subsidy gradually fell to 50 percent subsidy for those making between 185 FPL and 200 FPL.

After being accepted by the program, enrollees choose a health care plan on the state’s approved list.

Unlike the Oregon program, Arkansas plans to give people the same benefits as traditional Medicaid and have the same nominal cost-sharing. How the state would accomplish that is still being worked out, said Arkansas Medicaid spokeswoman Amy Webb.

In Florida, a plan being advanced in the state Senate would add those residents who become eligible for Medicaid under the health law’s expanded eligibility into a plan overseen by the state’s quasi-public agency that now runs the Children’s Health Insurance Program. It would receive federal Medicaid funding to contract with private insurers for coverage.

The plan, put forth by Republican state Sen. Joe Negron, would have higher cost-sharing for these beneficiaries than current Medicaid enrollees pay, but details have not been spelled out. Any cost sharing above federal Medicaid limits would require federal approval.

Joan Alker, co-director of the Georgetown University Center for Children and Families, said those efforts would be more costly because private insurers pay higher fees to doctors and hospitals. She said states that want to keep enrollees’ benefits and cost-sharing similar to what they are in traditional Medicaid would also face administrative hurdles to supplement the private plans.

However, one advantage of putting newly eligible Medicaid enrollees into private plans is that as their incomes change, they could stay with the same health plans and the same doctors, she said. With Medicaid health plans, people likely would have to change plans as their incomes rise.

Alker said many of the same insurers that would provide coverage under Medicaid managed care would benefit if the people are served in the private market. Its unclear if the private health plans would get paid higher rates than Medicaid plans, she said.

Craig Kuhn, program manager of the Oregon Family Health Insurance Assistance Program, said the program helped reduce the number of uninsured in the state, which was its goal. He said enrollees were in the program for an average of nearly four years.  Though the program also provided funding to help people pay their premiums for employer-sponsored coverage, about 60 percent used the program to buy individual coverage. Those enrollees could choose from seven different carriers.

Kuhn said states would face challenges using the concept on a much grander scale — Arkansas wants to serve more than 100,000 people. He said states would have to scale up their information technology and make sure participants have access to insurance agents or trained assisters to help them choose the right plan.

“The program worked pretty well,” said Jesse Ellis O’Brien, a Portland social worker and Oregon State Public Interest Research Group health care advocate.

Still, he said, the program limited enrollment due to its cost and the benefits were not as rich as some people preferred. “But it was a better option than going uninsured,” he said.