Permitting states to use Medicaid money to enable newly eligible Medicaid recipients to purchase health insurance on the private market may cost more than expansion of traditional state Medicaid programs.

Or so says the U.S. Government Accountability Office (GAO).

Writing in response to a request from the chairman of the House Energy and Commerce Committee and the ranking minority member of the Senate Finance Committee to look at the approved federal waiver that will permit Arkansas to expand its Medicaid program through the purchase of private insurance for newly eligible recipients, the GAO concluded that the federal government may spend $778 million more over three years on such an approach than it would have spent if the state had expanded its traditional Medicaid program.

The GAO said that the U.S. Department of Health and Human Services (HHS) did not perform a budget-neutrality calculation, which would have revealed the increased cost, instead accepting the state’s alternative methodology for determining cost-effectiveness.

Arkansas officials rejected the GAO’s conclusions, asserting that newly eligible Medicaid recipients would have been unable to find providers willing to serve them under a traditional Medicaid expansion.

GAO concluded that CMS may be approving waivers that are not budget-neutral.  CMS disagreed with this conclusion.

Learn more about the GAO analysis, why it was undertaken, and what it found by reading the GAO letter to the two members of Congress who requested the analysis.