WASHINGTON — Federal officials have approved a novel proposal from Arkansas to expand Medicaid by buying private coverage for poor people through the insurance marketplace being set up under the new federal health care law.
The Arkansas program, expected to cover more than 200,000 people, sets a precedent of national significance. It offers a hybrid coverage plan calculated to appeal to Republicans, taking federal money for the expansion of Medicaid and using it to purchase commercial insurance.
Other states, including Iowa, Pennsylvania and Ohio, have expressed interest in similar approaches.
Low-income parents and adults without any dependent children are expected to be the main beneficiaries of the Arkansas initiative, which was devised by a Democratic governor and a Republican-controlled state legislature.
Kathleen Sebelius, the secretary of health and human services, disclosed her approval of the plan Friday in a telephone call to Arkansas Governor Mike Beebe.
“Arkansas came up with its own plan to expand Medicaid using the private insurance market, and Secretary Sebelius and her team worked to ensure that we had the flexibility to make that plan a reality,” Beebe said. “Our actions have drawn positive attention from across the country, and now we will focus on getting this insurance to the Arkansans who need it to lead healthier, more productive lives.”
In the 2010 health care law, President Barack Obama and congressional Democrats sought to provide insurance to millions of Americans in two ways: by expanding Medicaid eligibility and by offering tax credits to people with somewhat higher incomes, to help them pay premiums for private insurance.
The Obama administration agreed to waive certain provisions of Medicaid law for three years to allow Arkansas to demonstrate the effectiveness of “premium assistance.” The state will use federal Medicaid money to pay premiums of health plans offered in the new insurance marketplace, known as an exchange.
Cindy Mann, a deputy administrator of the federal Centers for Medicare and Medicaid Services, said that most newly eligible beneficiaries would receive Medicaid coverage from the same health plans that serve other Arkansas residents in the exchange.
The program will cover people ages 19 to 64 with incomes up to 133 percent of the poverty level ($15,280 for an individual).
Under the current Arkansas program, childless adults are generally ineligible for Medicaid, and parents who have dependent children are eligible only if they have incomes less than 17 percent of the poverty level.
Federal and state officials said the Arkansas program would allow people to stay in the same private health plan, with the same doctors, when their income fluctuates. In other states, it is expected that many people will move back and forth between Medicaid and private health plans sold on the exchange as their income goes up or down.