AR Private Option passed with Jonathan Gruber-like methods



8922875075Many have now seen several videos of Professor Jonathan Gruber bragging about deception and “tortured language” in the drafting of Obamacare (Patient Protection and Affordable Care Act) in order to fool the American people into accepting the law. In the videos, Gruber repeatedly calls the American people stupid.

Some of his statements in the videos include:

  • “The mandate was written ‘in a tortured way’ so that it would not look like taxes because the bill would have died.
  • “Risk related subsidies were written so that it would not be obvious that healthy people pay in and sick get money.
  • “A ‘Cadillac tax’ on better health benefits was disguised as a tax on evil insurance companies, but in reality it was a tax on consumers because the tax would be passed on to consumers in the form of higher premiums.”

About the effort to fool the American people Gruber said:

“Lack of transparency is a huge political advantage. And basically, call it the stupidity of the American voter or whatever, but basically that was really really critical for the thing to pass…”

Here is a link to one of several videos of Jonathan Gruber bragging about deception in Obamacare. [Watch]


No, Jonathan Gruber was not involved in the crafting of the Private Option. (I hope.) No, this article does not point at one of the architects of the Private Option as an Arkansas version of Gruber.  So why bring up Jonathan Gruber in talking about the Arkansas Private Option?  It’s the videos. What Gruber says in the videos is relevant because of some parallels with the effort to pass the Private Option. This article is about how Obamacare Medicaid Expansion (which was said to have no chance of passing) was eventually passed with extensive re-branding and some ineffective safeguards and a resulting higher program cost.

[UPDATE: After this article was posted, the Foundation for Governmental Accountability posted a video of Jonathan Gruber talking about the Arkansas Private option.  Check out our link to the video here]


Fab fourSenator Jonathan Dismang, Senator David Sanders and Representative John Burris have been called architects of the Private Option.[i]  But this leaves out perhaps the most important name – Governor Mike Beebe.  The Arkansas Democrat Gazette says the original draft of the Private Option came from Governor Beebe. [ii]

Of the FAB FOUR , only Dismang and Sanders will be back for the 2015 Session of the General Assembly.

  • Governor Mike Beebe could not run for reelection because of term limits.
  • John Burris lost his race for State Senate to political newcomer Scott Flippo, who opposes the “Private Option.” In his race, Burris was insistent on making wild claims that the Private Option was not Medicaid Expansion and that it somehow represented “a fight against Obamacare.”

Obviously the Department of Human Services had to be involved because of their expertise. This would include John Selig, Director of the Department of Human Services and Andy Allison, Medical Services Director. Allison later resigned and became a consultant.

Another person involved in the development of the bill was Representative Bruce Westerman, now Congressman-Elect Westerman.  However, it is significant that Westerman disavowed the bill, insisted that his name be removed from the bill, and actively tried to defeat the bill.

In addition, U.S. Health and Human Services Secretary Kathleen Sibelius was essential in the development of the Private Option.  “Kathleen Sebelius, the secretary of the U.S. Department of Health and Human Services, said in March [2013] that she will help Arkansas craft its private-option model.[iii]


In 2012, Governor Beebe was touting the benefits of Obamacare Medicaid Expansion.  As a Democrat Governor he sought to make Arkansas the first southern state to adopt Medicaid Expansion.

Adding leverage to his position, his administration predicted in November 2012 that there would be a shortfall in Medicaid funding of $460 million.[iv] The Arkansas Democrat Gazette reported “Gov. Mike Beebe said Wednesday [11/14/14] that expanding the state Medicaid program would be the best way to avoid cuts to nursing care for 10,000 to 15,000 senior citizens and disabled people that his administration proposed to fix the program’s projected shortfall in fiscal 2014.[v]

State legislators were obviously concerned that Medicaid cuts could mean grandma might get tossed out of the nursing home on their watch. Using the shortfall as a scare tactic, Beebe pushed Medicaid Expansion as the answer to the problem. Many Republicans found themselves in a difficult position.  They did not want to be associated with Obamacare, but they also did not want to be blamed for scenes of the elderly being shoved out of nursing homes.

Even the threat of a massive funding shortfall was not enough to gain enough Republican votes to pass Medicaid Expansion.  But the threat only helped once Medicaid Expansion was rebranded as being something else.

The curious thing about the shortfall scare tactic is that once Medicaid Expansion passed as the unofficial name “Private Option”, the talk of a $460 million shortfall just went away (not to mention GIF money of $300 million appeared by April 2013.)  The talk of shortfall went away (and a surplus appeared) despite the fact that no Medicaid Expansion funds would roll into the state for many months. So what happened to the $460 million shortfall in Medicaid? Was it real?


The Private Option includes more than its share of “tortured language” and features a deceptive sales pitch.

A. Summary of Deceptive Claims


  • It is not Obamacare if you run the benefits through an insurance company
  • It has to do with independence
  • It’s all about private enterprise


  • It’s not an entitlement
  • Financial triggers
  • We can terminate the program quickly
  • Sunset Clause


  • You can’t pass up free money, and if we don’t take the money some other state will get our money.
  • It’s all about poor families
  • Fighting Obamacare by passing the Private Option.
  • There will be a hole in the Arkansas budget if you repeal it


  • Medicaid system is overloaded and must have a new benefit delivery system. 

B. Re-branding Obamacare Medicaid Expansion

O! be some other name: What’s in a name?
that which we call a rose by any other name would smell as sweet;- Shakespeare

  1. Hatching the plot.
    In late 2012, it was looking like the issue of Medicaid Expansion would have to wait until another legislative session, perhaps a special session.  Then like a movie monster that rises from near death, new life was given to the effort to pass Medicaid Expansion when in late February 2013, Governor Beebe secured an oral commitment from U.S. Health and Human Services Secretary Kathleen Sibelius to allow federal Medicaid Expansion funds to be run through insurance companies as a way to appeal to Republicans.  Legislators were already worried about potential Medicaid cuts from the supposed Medicaid funding shortfall.  If the architects of the Private Option originally only had the goal of selling the Private option as a less offensive version of Medicaid Expansion, it was quickly morphed into the deception that the Private Option was something other than Medicaid Expansion. It was sold as an “alternative” to Medicaid.  A PIG WITH LIPSTICK IS STILL A PIG.There appears to be a parallel between the re-branding of Obamacare Medicaid Expansion and the tactics that Jonathan Gruber described in the Obamacare goal of eliminating tax benefits of good health care plans.

    the only way we could get rid of it was first by mislabeling it, calling it a tax on insurance plans rather than a tax on people when we all know it’s a tax on people who hold those insurance plans.” – Jonathan Gruber

    For the Private Option to be an “alternative” to Medicaid Expansion, instead of actually being Obamacare Medicaid Expansion, these government agencies and officials would all have to be wrong in their assessment of the Private Option:

a. U.S. Health and Human Services Secretary Kathleen Sibelius A letter by Kathleen Sibelius cites a March 29, 2013 memo that provided guidance on some issues including: “People who receive premium assistance are still Medicaid beneficiaries.[vi] (This memo was dated even before Governor Beebe provided a draft of the Private Option to legislators.)

b. U.S. Health and Human Services Department Its own website says Arkansas is a Medicaid Expansion State. (Obamacare)

c. Arkansas Department of Human Services. DHS’s waiver application for the “Private Option” demonstration project:

i. Sought approval for the Private Option because the 1115 waiver is for obtaining flexibility on financing Medicaid or delivering Medicaid services (The waiver process is not for creating a program that is something other than Medicaid).
ii. Refers to Arkansas Medicaid Expansion (Obamacare)
iii. Makes references to the Affordable Care Act (Obamacare)

d. U.S. Government Accounting Office In discussing funds received by Arkansas for the Private Option, the U.S. Government Accounting Office said “In approving Arkansas’s Medicaid Section 1115 demonstration, the Department of Health and Human Services (HHS) gave the state the authority to test whether providing premium assistance to purchase private coverage offered on the health insurance exchange will improve access to care for individuals newly eligible for Medicaid as a result of the Patient Protection and Affordable Care Act (PPACA). (Obamacare)

Supporters couldn’t call it Medicaid Expansion because it still would not have been marketable, it had to be something different. It needed a new name, and with the new name it was as if Medicaid Expansion was put in the witness protection program and given a new identity.

  1. How a descriptive name would have read.
    If you gave the program a descriptive name it would be something like: Medicaid Expansion under the Patient Protection and Affordable Care Act (Obamacare) with a Section 1115 Medicaid waiver for a demonstration project for flexibility on delivering Medicaid services.  Or, for short it would just be Obamacare Medicaid Expansion.At least five states sought and received federal approval for Section 1115 Medicaid waivers for demonstration projects. It doesn’t appear that any of the other states followed Arkansas’ tactic of claiming that a federal waiver for a demonstration project magically transformed Medicaid Expansion into something else.
  1. Make It About Independence.
    The first attempt at a name appeared in the “shell bills” filed even before a draft of the “Private Option” legislation appeared. Once drafted, the provisions were amended into the shell bills. (A shell bill is a stripped down bill that does not have all the major provisions fleshed out. In this instance the shell bills didn’t have ANYTHING meaningful in the bill and might not be constitutional – SeeIs the Obamacare Private Option Unconstitutional?)The shell bills had the name “Health Care Independence Act”. We all love “independence.”  But, what does independence have to do with Arkansas’ version of Medicaid Expansion?  Nothing that I have found. Everything about the act is dependent on federal Medicaid Expansion and the federally approved waiver on how to deliver Medicaid services to individuals who qualify as Medicaid Expansion enrollees.
  1. Make It About Private Enterprise
    Proponents of the legislation were stuck with “Health Care Independence Act” as the name of the legislation, but even before the bills got out of committee a new unofficial name was being touted – “Private Option”. The buzzword “independence” apparently didn’t give a strong enough image, and supporters quickly moved to adopt the made up name “Private Option.” The words “Private Option” do not appear in the bills but certainly is a catchier name for selling Medicaid Expansion.So what is so “private” about the “Private Option”?  Not much! The only connection to anything private is that Arkansas’s Medicaid Expansion 1115 wavier lets Medicaid Expansion dollars flow though insurance companies to provide health coverage instead of using a Medicaid card and seeing doctors who accept Medicaid. Running the program through insurance companies meant private enterprise got a cut of the action.  Still, everything about the program is under federal government limits, federal government regulations, federal government terms and conditions, and government funding. Even with a wavier on how the services are delivered, it is still a federal program and is still Obamacare Medicaid Expansion.
  2. Make it a Republican Plan
    The message was pushed that the Private Option was a Republican Plan.  The legislation needed to be seen as a Republican plan to help secure needed Republican votes.  (In the 2014 general election candidate James McLean, an unsuccessful Democrat candidate for State Senate, latched on to the message that the Private Option was a Republican plan in an unsuccessful effort to defend his vote for the law.)It is true that the lead sponsor of both the House and Senate bill on the Private Option were Republicans and that three Republican legislators were being called architects of the Private Option by the Arkansas Democrat Gazette.  But to make the Private Option a Republican plan, you have to ignore some critical facts:

a. It was Democrat Governor Beebe who obtained the key federal okay to run Medicaid Expansion through insurance companies.

b. It was Democrat Governor Beebe who gave the initial draft legislation to legislators.

c. Democrat Senator Paul Bookout was the lead sponsor of the Senate bill, but to make the Senate Bill look more Republican, they had to move Bookout’s name from the lead position to the second position and insert Republican Senator Jonathan Dismang’s name as the lead sponsor.

d. Seventy-five percent of the House Republicans voted “NO” on passage of the Private Option bills.

C. Tough Sounding Toothless Provisions

Let us look as some supposed protections included in the Arkansas legislation.  The Private Option included three provisions (or safeguards) that helped some Republicans become more supportive of the legislation.  The three deceptive provisions are:

  • It is not an entitlement program.
  • A financial trigger that would take Arkansas out of the Private Option if the percentage of federal support for the program went down.
  • The ability to quickly pull out of the Private Option.
  1. Not An Entitlement Program
    The Health Care Independence Act of 2013 (Private Option) requires an enrollee to affirmatively acknowledge that “The program is not a perpetual federal or state right or a guaranteed entitlement” and state that “The program is not an entitlement program.”  (ACA § 20-77-2405 (i)(2) and (i)(3))What makes a program an entitlement?  The definitions vary, but an entitlement program provides some type of rights to benefits under a government program.  “Medicaid” is an example of an entitlement program.  So in the Private Option there is merely a Medicaid waiver for delivery of benefits under Medicaid Expansion and yet the legislation indicates that the program authorized under Arkansas law can’t be an entitlement program.  That is a tall order.  The statement that it can’t be an entitlement program was essential as part of the effort in trying making the Private Option appear to be something other than Medicaid Expansion.In my view this is the most blatant Gruber-like language in the bill. Was this provision ever intended to be anything more than just window dressing?  NO! I say this for three reasons:

a. Before Governor Beebe gave the draft law to legislators, U.S. Health and Human Services Secretary Kathleen Sibelius stated enrollees were still Medicaid beneficiaries. Medicaid beneficiaries have rights and Medicaid is an entitlement program. Therefore the Private Option must be an entitlement.

b. CMS terms and conditions conflict with the promise.  Arkansas quickly agreed to federal terms and conditions from the Centers for Medicare and Medicare Services (CMS) that conflict with the promise.  I raised this issue before the Public Health Welfare and Labor Committees in January and February of 2014, but I have yet to hear a rebuttal of why the terms and conditions do not conflict with the promise that the Private Option would not be an entitlement program. (As you will see later it turns out the “tortured language”was just drafted to look like a promise but is no restriction at all.) The CMS Special Terms and Conditions provide enrollees rights concerning the ability to receive Private Option benefits and therefore conflict with the promise:

 i. In terminating the program, the State must provide for administrative review to determine if private option participants qualify for Medicaid eligibility under a different eligibility category. (Terms and Conditions (9)(d)) The state must notify the participants of this right.

ii. If a private option participant requests a hearing on Medicaid status before the date of termination of the program, the State must maintain the person’s private option benefits during the appeal. (Terms and Conditions (9)(c) and (9)(d)) This appeal process could extend after the scheduled termination of the program and therefore require continued benefits after the scheduled termination date of the program.

c. Although an initial reading of the entitlement language may lead you to think it is a promise that the Private Option will not be an entitlement program, a closer reading reveals that the tough sounding language does not restrict the Private Option at all. It was written in a way to fool the reader. The “tortured language” requires enrollees to say the Private Option is not an entitlement program. This is an important distinction. The language is about what the enrollee must do as part of enrollment, and nowhere does the language actually say the Private Option can’t be an entitlement program. The enrollee acknowledgement is just empty words. I can see no other purpose for putting the words in the bill other than to deceive.

  1. Financial Triggers
    The Private Option law includes financial triggers which are supposed to automatically terminate the program if federal funding drops below certain annual thresholds.

“(h) The program authorized under this subchapter shall terminate within one hundred twenty (120) days after a reduction in any of the following federal medical assistance percentages:

(1) One hundred percent (100%) in 2014, 2015, or 2016;
(2) Ninety-five percent (95%) in 2017;
(3) Ninety-four percent (94%) in 2018;
(4) Ninety-three percent (93%) in 2019; and
(5) Ninety percent (90%) in 2020 or any year after 2020.”

a. Can you really exit in 120 days because of financial triggers?
Arkansas was quick to agree to federal terms and conditions which prohibit a quick exit and would make following the Arkansas financial trigger a breach of the CMS Terms and Conditions and would risk the imposition of federal penalties. The CMS Special Terms and Conditions impose numerous requirements before the state may terminate the program, including a lengthy notice period, approval of a plan by CMS (that is a veto power), appeals procedures for enrollees, etc.  None of the requirements CMS imposes could be accomplished within the time Arkansas’ financial triggers require

b. Cost overruns – do they count?
The plain terms of the financial trigger requires federal support of a specific percentage of the program each year or the program must terminate. Supporters of the Private Option law contend that payments by Arkansas for cost overruns do not count against those percentages, but there is nothing in the Arkansas law that indicates such an exception.  They also claim cost overruns do not count until Arkansas actually has to pay for the cost overruns which is years from now. In other words they claim that the annual limits in Arkansas law are not effective if you just delay payment.  Under their view Arkansas can incur tens or hundreds of millions in cost overrun debt and the trigger still wouldn’t apply.  Is that “tortured language” in your book?

  1. Ability to terminate the experiment quickly
    The Private Option includes several provisions indicating the state has the ability to quickly terminate the program.

a. If federal medical assistance percentages fall below a specific threshold, the program “automatically terminates within one hundred twenty (120) days.” (ACA  20-77-2405 (h))
b. People who enroll in the program must affirmatively acknowledge that the “program is subject to cancellation upon appropriate notice”. (ACA § 20-77-2405 (i)(2))
c. DHS is given authority to make Medicaid State Plan Amendments but only those that are “optional and therefore may be revoked by the state at its discretion.(ACA § 20-77-2405 (a)(2)(A)(ii)(B))

 None of the architects complained when a few months later, the federal government imposed a number of restrictions on Arkansas’ ability to terminate. Instead of cancellation upon notice, CMS purports to impose numerous requirements including a veto power because of the need to seek CMS approval. The CMS Special Terms and Conditions concerning termination of the program:

a. Require a minimum of seven (7) months of termination notice but this period before termination could be much longer in trying to meet all CMS requirements. The seven (7) month notice includes a thirty (30) day public comment period before submitting written notice to CMS and a six (6) month written notice to CMS.  (Terms and Conditions (9)(a));
b. Require Arkansas to obtain CMS approval of a transition and phase-out plan. It could be argued that CMS has given itself a de facto veto power by allowing CMS to reject termination plans. (Terms and Conditions (9)(b))
c. Prohibit Arkansas from even beginning implementation of phase-out activities until fourteen (14) days after CMS has approved the plan. (Terms and Conditions (9)(b))
d. Requires the transition and phase-out plan to include the process by which it will notify affected beneficiaries, the content of said notices (including information on the beneficiary’s appeal rights), the process by which the State will conduct administrative reviews of Medicaid eligibility prior to the termination of the program for the affected beneficiaries, and ensure ongoing coverage for those beneficiaries determined eligible, as well as any community outreach activities including community resources that are available. . (Terms and Conditions (9)(c))
e. Provide that if an enrollee is appealing Medicaid status at the time the program is scheduled to end, that the enrollee is entitled to continued benefits under the program during the remainder of the appeal process. (Terms and Conditions (9)(d))

  1. Sunset Clause
    The Private Option law includes an end date (Sunset Date).  Unless extended or terminated earlier the Arkansas law authorizing the Private Option ends June 30, 2017.  The Sunset Date is not deceptive. It is an actual deadline.  The Sunset Date, however, appears to have been merely a ploy by supporters to get it passed, because within days of enrollees getting coverage, Private Option supporters were already making the argument that the program can’t be ended because people have relied on the program.  Proponents quickly ignored language showing an intent to be able to terminate at any time and enrollee’s acknowledgement of that right.

 D. Other Claims

  1. You can’t pass up free money, and if we don’t take the money some other state will get our money.
    The idea that it is free money comes from the fact that Arkansas doesn’t have to pay part of the cost of the Private Option until 2017.  Well, that is if you don’t count cost overruns which appear to be growing at an alarming rate.  The idea that “It’s our money and we want it now!” came from the fact that Arkansas taxpayers must pay taxes imposed by Obamacare.” .This idea looks narrowly at the taxes with blinders on.  In reality our country is borrowing money from other countries and printing stacks of money in order to continue a federal debt of over $17.9 Trillion dollars.I wish they had been as protective when Obamacare robbed Medicare to support Obamacare.  It took tax money Arkansans paid in for Medicare and gave the money to support Medicare Expansion where no taxes were paid in. (When hospitals tout the Private Option ask them how much more money Obamacare is taking from them in reduced Medicaid payment and ask where their lobby stood on passing Obamacare.)
  2. It’s all about poor families
    During the 2014 elections several loosing Democrats shouted that the Private Option is all about poor families.  They should have checked census data which indicates that the primary group to be served in Arkansas is able bodied working age adults with no children.[vii]
  3. Fighting Obamacare by passing the Private Option.
    To make the Private Option sound better to conservative voters, it was sold as Arkansas’ effort to fight Obamacare.  This bizarre claim was used extensively by John Burris in his failed campaign for the State Senate.  This was an odd argument since the federal government was saying Arkansas was now a Medicaid Expansion state.  The argument didn’t confuse enough voters and the anti-private option candidate won.
  4. There will be a hole in the Arkansas budget if you repeal it.
    Governor Beebe has been warning that if the Private Option is repealed there will be a $100 million hole in Arkansas’ budget. (Remember the warning just two years ago that there would be a $460 million hole for Medicaid.)Even if he was right this time and there was a $100 million hole, the consultant his administration hired to project the cost to Arkansas for the Private Option shows that Arkansas is headed to a bigger hole by not repealing the Private Option.  Here is what Optumus projected (and it doesn’t include cost overruns):

2017       $111,392,999
2018       $182,724,285
2019       $218,634,180
2020       $283,454,908
2021       $333,500,000[viii]


In Arkansas’ Section 1115 Medicaid waiver application one of the justifications for the waiver is that the regular Medicaid delivery system is at capacity and not workable for the additional enrollees.

“The State’s existing network of fee-for-service Medicaid providers is at capacity; as a result, Arkansas would be faced with the challenge of increasing providers’ capacity to serve Medicaid beneficiaries to ensure adequate access to care. In short, absent the Demonstration, Arkansas’s Medicaid expansion would rely on the existing Medicaid delivery system and perpetuate an inefficient, underfunded and inadequately coordinated approach to patient care.”

Wait,  A few months earlier Governor Beebe was touting Medicaid Expansion and didn’t say anything about needing to have a different delivery system.  It was only after a cool reception from the legislature that a waiver for a different delivery system was thrown out on the table.

The statement may be true that the Medicaid network is at capacity, but adding the argument to the waiver was just window dressing. U.S. Health and Human Services Secretary Kathleen Sibelius didn’t need the argument.  She had been a key player from the beginning.


After bragging about deceptions in getting Obamacare passed, Jonathan Gruber said: “I wish Mark was right – we could make it all transparent. But I’d rather have this law than not.

In Arkansas the goal of getting Obamacare Medicaid Expansion passed no matter what, saddled Arkansans with a more costly system that is  over budget every month.  But supporters don’t seem to be bothered by the extra cost or by the the tortured language that gave us Medicaid Expansion.


Private Option opponents are still saying the program is a bad deal and not sustainable. But what are Private Option supporters saying?

President Pro Tempore of the Senate, Jonathan Dismang (one of the FAB FOUR) has been talking about the Private Option.  First, he seems to still be saying that new legislators who campaigned against the Private Option are just not enlightened.  Second, Dismang is talking about the Private Option surviving in a more conservative way.  “I think what it’s going to require, and something I would be supportive of, is additional changes, making sure it is as conservative of a model as we can.[ix]

A conservative tweak to a big government solution with big government control?  Now that is “tortured language.”

lipstick_on_pigBased on the track record so far, I only have one question about any 2015 proposals to save the Private Option with a more conservative model.  What shade of lipstick will be put on the pig this time?






[ii] Beebe drafts measure to expand Medicaid, Arkansas Democrat Gazette, Page 1, 03/23/2013

[iii] Medicaid vote has legislators in pause mode, Arkansas Democrat Gazette, Page 1,04/14/2013

[iv] Agency: Cut services or expand Medicaid, Arkansas Democrat Gazette, Page 1, 11/14/2012

[v] Beebe: Expand Medicaid as fix, Arkansas Democrat Gazette, Page 3, 11/15/2012

[vi] Sebelius’ letter cites 2 memos by state, Arkansas Democrat Gazette, Page 7, 04/03/2013