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May 2013 Brief: Volume 20, Number 14

  Click Here for a pdf verison.

Medicaid, the “Arkansas” Proposal, and IowaCare Use


by Deborah D. Thornton


Though the Supreme Court ruling in 2012 that state governments were not required to expand Medicaid in order to continue to receive federal funds for current coverage provided some relief to the onerous regulatory burden of the Patient Protection and Affordable Care Act (PPACA), the Obama administration continues to try to force expanded Medicaid on unwilling states.


A recent report by the Heartland Institute noted that a significant problem with government health care is that when consumers of a product have no personal accountability for use or impact on the cost, inflation and overuse result. Government spending will correspondingly increase. From the very beginning in 1965, Medicare costs have been at least nine to ten times higher than projected.[1] Medicaid fraud is rampant and famously hard to control and detect.


If agreed to by state governments, Medicaid expansion will extend government health care to all those who earn less than 138 percent of the federal poverty level (FPL), approximately $32,500 per year modified adjusted gross income for a family of four, irrespective of other qualifying criteria and asset or resource tests.[2]


Interestingly, what is being called the “Arkansas” proposal may be the most beneficial for state governments. In this Medicaid expansion design, childless adults who make above 100 percent of the FPL are declined Medicaid coverage by the state. This forces them to go to the health exchanges, where they are eligible for the federal insurance subsidy for those making between 100 and 400 percent of the FPL. The amount of the federal subsidy for those at less than 100 percent of the FPL is estimated to be about $9,000 by 2022, while Medicaid is valued at only $7,000.[3] Though the money still comes from taxpayers and businesses, the federal government is responsible, not the state government. Several other states are now considering this approach.


With current and increasing restrictions by providers on accepting Medicaid patients and the limits of reimbursement for procedures under Medicaid, it is anticipated that these people will have better insurance, and hopefully better health care, in the long run by using insurance purchased through the exchanges.


Additionally, Arkansas Governor Mike Beebe is proposing an outcomes-based provider payment system, versus the current fee-for-service model. As Julie Munsel, Director of Communications for the Arkansas Department of Human Services, said recently, the state analysis shows that as much as 30 percent of the Medicaid costs are for potentially unnecessary tests and treatments, providing little or no impact on patient outcomes.[4]


Currently Medicaid serves over 680,000 Iowans or 22.4 percent of the state population. Medicaid is the second largest payor of health-care costs, after Wellmark Blue Cross/Blue Shield, and processes almost 33 million claims a year.[5] Included in the population served are people with incomes over 133 percent of the FPL through a waiver program (IowaCare and Family Planning). “Regular” Medicaid has just over 420,000 participants.[6]


The IowaCare demonstration project serves low-income adults who do not qualify for Medicaid. These adults, who are between 19 and 64 with incomes below 200 percent of the FPL, would convert to a straight Medicaid enrollment under the PPACA.[7] Approximately 69,000 adults are enrolled in this program. The typical enrollee is a single adult or couple with a chronic condition in generally poor health, aged 41, with an income of less than 150 percent of the FPL. Enrollment has grown from just over 30,000 in FY2010 to an estimated 85,000 in FY2015. Most people who leave the program do so by going on Medicaid disability, not improving either their health or income.[8]


When reviewing the February 2011 University of Iowa Hospitals and Clinics (UIHC) report on services utilized by the IowaCare patients, the largest category was that of Emergency or Specialty Care, consistently about 83 percent. The highest category was DRG Code 897 – people admitted for “Alcohol/drug abuse or other dependence issues, without rehabilitation services.” Next highest was “circulatory disorders.” Number five was code 918 – “poisoning and toxic effects of drugs.”[9] The health-care issues of those using the IowaCare program at UIHC, primarily caused by poor lifestyle decisions and personal choices – drug and alcohol use – will not be resolved by expanded Medicaid and more tax money.


We must insist that our family members deal with their alcohol and drug abuse issues. This dependency is costing people their health, their ability to work, and their productivity. It is also costing taxpayers millions of dollars. The experiences so far with Obamacare and expanded government control of health care show that it only creates more dependency, increased costs, and increased taxes. Having almost half of Iowans receiving government health-care benefits is not a goal we should work toward.


Perhaps the Arkansas model, providing financial subsidies combined with personal responsibility and provider accountability for outcomes, is a good solution.


Public Interest Institute Policy Study 13-3, “Just Say ‘NO’ – and Keep Saying ‘NO’ – to Federal Health Care Exchanges and Medicaid Expansion,” is available at


[1] Peter Ferrara, “The Obamacare Disaster, an Appraisal of the Patient Protection and Affordable Care Act,” Policy Study #128, The Heartland Institute, 2010.
[2] “What’s Changing and When,”, <f> accessed on February 22, 2013.
[3] Benjamin Domenich, “Remember: Free Money Is Not Free,” The Heartland Institute, March 11, 2013, <> accessed on March 13, 2013.
[4] Becky Gillette, “Arkansas’ Proposed Medicaid Payment Changes Could Be Model for the Country,” Medical News of Arkansas, March 2013, <> accessed on March 22, 2013.
[5] “Improve Iowans Health Status,” FY2014 – 2015 Budget Submission, State Council on Human Services, State of Iowa, September 28, 2012, p. 3-2, <> accessed on March 22, 2013.
[6] Jennifer Vermeer, “Medical Assistance, Medical Contracts, IowaCare and HIPP,” Offer #401-HHS-003, 2013, <> accessed on March 7, 2013.
[7] “Improve Iowans Health Status,” p. 3-37.
[8] “Improve Iowans Health Status,” p. 3-38.
[9] Stacey T. Cyphert, “UI Health Care Update on Iowa Care,” University of Iowa Hospitals and Clinics, February 10, 2011, pp. 10, 13, and 17.


Deborah D. Thornton is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact her at


Permission to reprint or copy in whole or part is granted, provided a version of this credit line is used:"Reprinted by permission from INSTITUTE BRIEF, a publication of Public Interest Institute." The views expressed in this publication are those of the author and not necessarily those of Public Interest Institute. They are brought to you in the interest of a better-informed citizenry.




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