Must we pick between tax cuts and the repeal of the AR Private Option?


Do we really have to pick the Obamacare Private Option in order to fund tax cuts?

Private Option supporters are pushing the narrative that continuation of the Obamacare Private Option is necessary in order to fund Governor Asa Hutchinson’s proposed tax cuts. (The unsubstantiated number for alleged savings that has been thrown around is $100 million.  Even if you blindly accept their number, it is unlikely that it considers the tens of millions in cost overruns each year which must be paid back to the federal government at the end of the demonstration project.)

Private Option supporters want us to think the only way to deal with state budget needs is to continue a failed, over budget entitlement program. Even without having to refute the unsubstantiated numbers, it is evident that their premise is based on a false dilemma.  It is not an either or situation. Tax cuts can be made without continuing the Obamacare Private Option.

To prove this point here is one example of a cost savings method.  In 2013 the Alexander Group identified fiscally conservative initiatives that can save Arkansas between $112 million and $161 million while improving the administration of Arkansas’ Medicaid and welfare programs.

Alexander Group Report
In 2013 the Arkansas Legislature commissioned the Alexander Group to study Arkansas’ Medicaid and welfare programs. The Alexander Group submitted its report on July 4, 2013.  The report concluded that reforms in these programs could result in a substantial savings.  The Alexander Group proposed thirty two initiatives that would save the state between $112 million and $161 million. Thirty of the thirty two initiatives were identified as initiatives that could be undertaken fairly easily.  Some initiatives need legislation but others only need Executive Branch action.

With Republican majorities in the House and Senate you would expect the recommendations to draw quite a bit of interest, but it didn’t. In my view the Alexander Report was shoved to the side because its proposed savings conflicted with the narrative that the Private Option was the only way for the state to address Medicaid funding.

The Alexander Report was submitted in early July.  Despite the state spending taxpayer money for the study, the report sat on the shelf for months. A Public Health, Welfare, and Labor Committee hearing on the report did not occur until November 18, 2013, right before the Thanksgiving and Christmas holidays and shortly before the start of the 2014 Fiscal Session of the legislature. The focus was all about saving the Obamacare Private Option.

If the report had come out before the 2013 Regular Session of the legislature, the Private Option might not have ever passed because it would have provided a reasonable alternative to passing the massive entitlement program as a temporary cost savings program. The report’s arrival in July was still inconvenient for the coalition that passed the Private Option (all the Democrats and some big government Republicans).  The Report was inconvenient for Private Option supporters because they still needed to sell the idea that the Private Option was the only way to save the budget (just as they are trying to doing now).  At that time, reauthorization of the Obamacare Private Option during the 2014 Fiscal Session was in doubt. A full exploration of the proposed savings in the Alexander Report would have made the task of Private Option supporters more difficult.  As it was, reauthorization of the Private Option only came after much brow beating, a highly publicized deal to get a Senate vote, and a number of tries to get reauthorization passed.

Despite a majority of the members of the Arkansas House and Senate claiming to be fiscal conservatives, the Alexander Group Report still sits on the shelf.  It is available on the General Assembly website, but you have to know where to look or you will never find it.  It is an attachment to the November 18, 2014 agenda for the House and Senate Public Health, Welfare and Labor Committees.  Here is a link to the 88 page Allexander Group Report:

The Alexander Report’s summary of cost savings begins on page 44 of the report (page 49 of the PDF file).  Detail on the thirty-two recommended initiatives begin at page 48 of the report (page 53 of the PDF file).

Defining the issues

  1. Governor Asa Hutchinson deserves praise for needed tax cut proposal. Arkansans need the relief.
  2. Whether to discontinue the Obamacare Private Option is an entirely separate issue from the tax cuts.
  3. If a budget savings is needed, it makes much more sense to implement conservative cost savings methods to reduce the cost of Arkansas’ Medicaid and welfare programs, instead of continuing a big government Obamacare program that will be financially unsustainable once Arkansas has to start paying part of the costs.
  4. Even if costs savings are not needed to fund the tax cuts, the recommendations of the Alexander Report should be given serious consideration to reduce the burden on Arkansas taxpayers.

Food for thought

  • The Private Option was sold as a “conservative alternative” to Medicaid Expansion. It wasn’t.  It is just a more expensive version of Obamacare Medicaid Expansion.  No matter how many alleged “conservative” tweaks you make to the program it is still nothing more than a liberal big government program.
  • The Private Option was sold as being designed for poor working families. It is not.  The target population is overwhelmingly able bodied working age people with no children and nearly half of the target population do not work at all.
  • The Private Option is being sold as a necessary trade-off for Governor Asa Hutchinson to be able to fund tax cuts for Arkansans. It is a false choice.  What is for sure is that Arkansas is incurring millions of dollars of cost overruns from the program and the Private Option will soon require budget busting contributions by Arkansas.