GAO faults spending limit for Obamacare Private Option

The U.S. Government Accountability Office (GAO) released a report today (9/8/14) saying Arkansas’ Obamacare Medicaid Expansion, known as the Private Option, has been allowed too high a spending limit by the Department of Health and Human Services (HHS) .  The GAO estimated that HHS allowed Arkansas $778 million too much over a 3-year period for the Arkansas’ Private Option.

The GAO said:

  • HHS approved a spending limit for Arkansas that was based, in part, on hypothetical costs which allowed higher payments without supporting data.
  • HHS gave Arkansas the flexibility to adjust the spending limit if actual costs proved higher than expected. HHS reported that it gave the same flexibility to some other states in implementing Obamacare Medicaid expansion.
  • HHS, in effect, waived its cost-effectiveness requirement that increases the risk that the Obamacare Private Option would not be budget-neutral.

The cost of the Obamacare Private Option has been running above the federal spending limit.  The GAO report complicates the issue by saying even the spending limit is too high.

It appears that once Arkansas starts paying a portion of the cost, it will be paying for a more expensive program than should have been allowed.  How will HHS respond to the GAO report?  It is unclear whether HHS will be reluctant to continue the high spending limit once the demonstration project is complete in 2017 or possibly even before then?

This is a link to the GAO Report