Alabama looks to Arkansas’ version of Medicaid expansion as a possible template

By: - April 10, 2023 3:15 pm

Arkansas' Medicaid expansion is being looked at as a model as Alabama officials consider expanding Medicaid to cover more low-income residents. Here Arkansas Gov. Sarah Huckabee Sanders (left) and Secretary of Human Services Kristi Putnam speak at at a February press conference announcing their intent to implement a work requirement to qualify for Medicaid. (John Sykes/Arkansas Advocate)

As Alabama lawmakers appear to warm up to the idea of Medicaid expansion, Arkansas has emerged as a potential model for the program.

The Alabama Hospital Association has previously stated they are working on an “Alabama-specific” model that draws from the best of other states, with Arkansas as a major source.

Arkansas expanded Medicaid in 2014, becoming one of the first southern states to do so. It provided health insurance to over 250,000 uninsured people making less than 138% of the poverty line, currently $34,307 a year for a household of three.

But unlike states that enrolled the expansion population into existing Medicaid programs, Arkansas chose to do it differently. The state used its expansion dollars to buy private insurance for the uninsured Arkansas population.

Some states have tried to expand Medicaid using similar models, but Arkansas is the only state that has kept the “private option” alive.

Although Arkansas’ Medicaid program has gone through some transformation since its inception, it has managed to provide health insurance to the state’s working population while keeping costs at or below what the federal government requires.

Arkansas provides health insurance to people living under the 138% Federal Poverty Level by enrolling most qualifying residents in a private health plan. Those who are medically frail and need more medical care are generally enrolled into traditional Medicare, which helps keep plans in the private option more affordable.

“The Private Option”

Dr. Joe Thompson, president & CEO at Arkansas Center for Health Improvement (ACHI),  is considered one of the architects behind Arkansas’ Medicaid expansion. In an interview last week, he said officials used Medicaid expansion as a tool to address some of the state’s problems in the commercial insurance sector.

“By putting that guaranteed purchaser (the federal government) in the individual market, we really stabilized our individual market,” he said. “And I think many times many key decisions are made in isolation without recognizing how they can, if used intentionally to stabilize your hospital system, increase the competition on your marketplace.”

The state has been able to keep costs down by enrolling up to 80% of the Medicaid population in a private plan and 20% in traditional Medicaid fee-for-service, Thompson said. Once the state reaches 80% of enrollees in the private option, it automatically starts enrolling new recipients under the traditional model.

Older residents and those who require specialized medical care, especially those in nursing homes and assisted-living facilities, are enrolled in Medicaid.

Thompson said that private insurance companies also stand to benefit from expansion because the cost of uncompensated care is not shifted to them. He said that they directly benefit from the expansion because the uninsured individuals are still going to the hospital and to the emergency room.

“But what the health care providers then have to do is they have to ask for higher reimbursement of their commercially insured people to offset the losses they have on their uninsured people,” Thompson said.


A National Bureau of Economic Research 2019 study by Sarah Miller found that mortality rates in states that chose to expand and those that did not were similar before the implementation of the ACA expansions. But once the policy was put into effect, there were considerable decreases in mortality rates in the states that decided to expand, as opposed to those that did not.

According to the study, Alabama experiences roughly 192 deaths per year due to not expanding Medicaid. Arkansas, in comparison, averted 110 deaths due to expansion.

A 2018 report from ACHI said the private option in Arkansas had been successful in increasing access to healthcare for uninsured Arkansans, reducing uncompensated care costs for hospitals, and improving health outcomes for patients.

“To give you an example of uncompensated care in our university medical system, before expansion, about 16% of their patients had no source of payments. After expansion that dropped down to 4%,” Thompson said. “So that’s how much benefit the charity hospital got in the state, and the private hospitals felt an equal impact.”

The study also compared the healthcare experiences of individuals enrolled in Medicaid and those in the private option in Arkansas.

Both groups had similar geographic access to providers and networks of providers, but enrollees in the private option felt that they had better access to care than Medicaid enrollees.

Other outcomes were mixed.  Medicaid enrollees had more emergency room visits, while private option enrollees had longer hospital stays. Private option enrollees received more clinical preventive services and disease management services and showed better to medication management, but Medicaid and private health’s use of different billing codes did not allow for a direct analysis.

No significant differences were observed for pregnancy-related care or non-emergency medical transportation.

Louis Norris, a health insurance analyst at, said the report didn’t show “obvious advantages one way or the other.”

“It was kind of a balancing act,” she said. “Some people were getting, by some metrics, better access to care, although overall mortality did not differ. Pregnancy outcomes, there was no difference. So, you’re on a lot more prescriptions if you’re in a [private plan], but you’re less likely to use the emergency room.”

Loretta Alexander, the health policy director at Arkansas Advocates for Children and Families, said that 30% more children became insured as a result of their parents becoming insured.

“Because typically, a lot of times when adults don’t have insurance, they don’t make sure that they sign their kids up for Medicaid. So just in them getting on the expansion, it allowed their kids to also get Medicaid,” she said.

The winning argument

To expand Medicaid using the private option, Arkansas officials had to get a waiver from the federal government, and Thompson said they got the waiver approved by explaining that the state did not have the capacity to provide insurance under the traditional model.

Officials said the state did not have enough physicians in the Medicaid network to provide healthcare to over 200,000 people in Arkansas. Physicians in the Medicaid network cared for about 26,000 enrollees prior to expansion, and Thompson said they accepted the waiver to avoid a network adequacy crisis.

“And our argument was – if we have to use the Medicaid provider network, we’re going to have to raise the payments across all of our Medicaid providers to get adequate coverage to where the commercial payers are,” Thompson said.

He said that ACHI spent a lot of time studying the potential impacts and benefits of providing insurance through the private market, and he said every one of their predictions came true. There was increased competition in the insurance market, a guaranteed purchaser that lowered rates, a reduction in applications for disability benefits, and financially stabilizing hospitals.

Managed care vs fee-for-service

Medicaid benefits can be offered by fee-for-service (FFS), managed care or both.

With FFS, the state pays healthcare providers directly for each service provided to a Medicaid beneficiary.

With managed care, the state pays for a managed care plan for each enrolled person. The plan pays healthcare providers for all Medicaid services that the beneficiary needs, based on the plan’s contract with the state.

The managed care approach, utilized in 39 states and D.C., covers most Medicaid enrollees under the age of 65, including non-disabled children and adults. But just over half of Medicaid’s spending on benefits is for managed care.

Norris said that if the state contracts with a private insurance company, it evens out the costs.

“So, they’ll give them $600 a month, $400 a month — whatever the capitated amount is — and then the state doesn’t spend anything else. It’s on the insurance company to manage that. And hopefully keep costs as low as possible,” Norris said.

Managed care has not been widely used for high-cost populations such as people with disabilities. Additionally, some expensive services like long-term care may not be covered under managed care contracts, though it’s becoming more common.

Medicaid FFS pays doctors less than other private insurance, which can make it hard for Medicaid patients to find a doctor. Doctors may choose not to participate in Medicaid due to the low payment rates. On average, Medicaid pays doctors about two-thirds of what Medicare pays, but this varies depending on the state and the service provided.

Compared to fee-for-service, managed care became more popular because it provides more control and benefits for the state. It also allows for better accountability for outcomes and supports efforts to measure, report, and monitor performance, access, and quality of care. Managed care programs can also improve care management and coordination.

Iowa’s Medicaid Expansion

Other states have tried to expand Medicaid using private health insurance, but ultimately reverted to the traditional expansion model.

Iowa received a waiver from the federal government in late 2013 allowing the state to provide health insurance through a private option for residents living between 101% and 138% of the federal poverty level. Everyone under the 100% poverty level would be enrolled in the state’s traditional Medicaid program.

But Iowa’s model was short-lived. The two health insurance carriers in the state faced financial hardships as one insurer was liquidated in about a year, as the majority of people in Iowa were enrolled in traditional Medicaid.

The state then switched to the traditional Medicaid model by putting enrollees under the 138% poverty level in Medicaid managed care, allowing the private insurers to manage care for the Medicaid population.

Arkansas avoided that problem because, much like Alabama, it had a very low eligibility level for Medicaid eligibility. Only residents making 17% of the federal poverty level qualified for Medicaid prior to expansion, much like Alabama’s current 18%, Thompson said.

Thompson said the model wasn’t successful in other states that used the private option because they already provided Medicaid services to residents up to the 100% poverty level.

“So going from 100% to 138% didn’t yield as many covered lives, and so the benefits probably weren’t as tangible and the leverage that the state had wasn’t as great,” Thompson said.

He said that for a state like Alabama, the number of people living between 18% of the poverty level and 138% would yield “hundreds of thousands” guaranteed payees into the insurance market.

“So, it’s an opportunity to use that leverage to make some impacts in your insurance world,” he said.

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Alander Rocha
Alander Rocha

Alander Rocha is a journalist based in Montgomery, and he reports on government, policy and healthcare. He previously worked for the Red & Black, Georgia's student newspaper, and Kaiser Health News, where he covered community health workers' successful efforts to vaccinate refugees in an Atlanta suburb. He is a Tulane and Georgia alumnus with a two-year stint in the U.S. Peace Corps.