1he A|exander Group, LLC

22 Whlsperlng Þlne 1errace
Creenvllle, 8l 02828
(401) 934-8288
alexandergroupco[gmall.com


kev|ew of Arkansas's
Med|ca|d and Þub||c-
We|fare System

Subm|tted to the
Genera| Assemb|y of the
State of Arkansas

Iu|y S, 2013



1he A|exander Group, LLC
Þrovldence, 8.l.
Þhlladelphla, Þa.
WashlngLon, u.C.



!""#$%&'$( *#+,&'#"- .#/ *&%&( 0#$(/"1("&-




lrlday, !uly 3, 2013




LxecuLlve SubcommlLLee of Lhe LeglslaLlve Councll
1he LeglslaLure of Lhe SLaLe of Arkansas
SLaLe CaplLol, 8oom 313
LlLLle 8ock, Arkansas 72201

1o Lhe SubcommlLLee:

1he Alexander Croup (AC) ls pleased Lo respecLfully submlL Lhls revlew of Arkansas's
Medlcald and publlc-welfare sysLem.

1he 8ureau of LeglslaLlve 8esearch of Lhe Ceneral Assembly commlssloned 1he
Alexander Croup Lo use lLs professlonal experLlse and knowledge Lo assess Arkansas's publlc-
welfare programs and Lo recommend prellmlnary shorL-Lerm lnlLlaLlves Lo help Lhe Ceneral
Assembly lnlLlaLe cosL savlngs. now LhaL our revlew ls compleLe, we belleve LhaL our reporL wlll
provlde guldance and lnslghL as Arkansas, llke oLher sLaLes, grapples wlLh Lhe full
lmplemenLaLlon of Lhe Affordable Care AcL and Lhe lmperaLlves of Medlcald and welfare
reform.

1hls sLudy and reporL would never have maLerlallzed wlLhouL Lhe exLenslve help of Lhe
audlL sLaff of Lhe ulvlslon of LeglslaLlve AudlL of Lhe Arkansas leglslaLure and Lhe cooperaLlon of
several sLaLe agencles, especlally Lhe ueparLmenLs of Puman Servlces, PealLh, and Workforce
Servlces. 1he prompL and professlonal asslsLance Lhe AC sLaff recelved from Lhe leglslaLure and
execuLlve deparLmenLs was lndlspensable Lo Lhls pro[ecL, acqualnLlng our sLaff wlLh Arkansas's
welfare sysLem, admlnlsLraLlon, and programs, as well as Lhe sLaLe's currenL lnlLlaLlves of
reform. 1he facL LhaL our work was conducLed aL Lhe end of Lhe sLaLe flscal year--and boLh
leglslaLlve and agency sLaff were overwhelmed wlLh Lhe lssue of Medlcald expanslon-makes
Lhelr conLrlbuLlon Lo Lhls sLudy and reporL all LhaL more lmpresslve.

uurlng Lhe Llme alloLLed for Lhls pro[ecL, 1he Alexander Croup delved lnLo as many
deLalls, daLa, and lssues as posslble. Clven Lhe enormlLy and complexlLy of Lhe publlc-welfare
sysLem, we soughL Lo dellver for Arkansas Lhe maxlmum reLurn on lnvesLmenL: focuslng our
aLLenLlon on Lhe mosL prevalenL and common elemenLs Lo provlde Arkansas a head sLarL on
cosL savlngs and reform lnlLlaLlves. A number of complex and Llme-consumlng analyses had Lo
be seL aslde as Lhey would requlre a more Lhorough revlew. noneLheless, our flndlngs and


LxecuLlve SubcommlLLee of Lhe LeglslaLlve Councll
lrlday, !uly 3, 2013
Þage 2



recommendaLlons, especlally Lhose ln Appendlx A, can be falrly easlly adopLed. 1hese
recommendaLlons wlll noL only provlde shorL-Lerm savlngs buL also wlll lmprove Lhe
admlnlsLraLlon, efflclencles, and ouLcomes of welfare programs. Appendlx 8 provldes Lwo
addlLlonal lnlLlaLlves LhaL are more lnvolved buL wlll also provlde cosL savlngs and lmprove
quallLy. 8eyond Lhese speclflc recommendaLlons, Lhe reporL provldes oLher recommendaLlons
for more necessary subsLanLlve and comprehenslve reforms LhaL wlll resulL ln even beLLer
ouLcomes, alLer Lhe currenL cosL Lrend, lower Lhe welfare burden, provlde serlous rellef Lo Lhe
Arkansas sLaLe budgeL, and vasLly lmprove Lhe llves of reclplenLs.

uurlng Lhe Llme perlod of Lhls revlew, AC was asked Lo perform oLher duLles by Lhe
leglslaLlve leadershlp, lncludlng offerlng advlce and analysls of Lhe Þubllc CpLlon Medlcald
expanslon and varlous pleces of leglslaLlon affecLlng Lhe publlc-welfare sysLem.

Whlle Lhe Alexander Croup ls lndeed graLeful for Lhe asslsLance recelved from Lhe
leglslaLure and Lhe execuLlve deparLmenLs, we accepL full responslblllLy for Lhe conLenLs of Lhls
reporL, lncludlng any errors or omlsslons.

1hank you for glvlng us Lhe opporLunlLy Lo serve Lhe SLaLe of Arkansas wlLh Lhls
lmporLanL revlew. lf you have any quesLlons or requlre furLher lnformaLlon, please conLacL me
aL: alexandergroupco[gmall.com.

Slncerely,



Cary u. Alexander
ÞresldenL and CL0




1A8LL CI CCN1LN1S


1. 8ackground and Cverv|ew 1

2. 1he 8urden of the Med|ca|d-We|fare System 6

3. Soc|oeconom|c Costs and D|s|ncent|ves 17

4. Ma[or Þo||cy-keform kecommendat|ons 23

S. 8udgetary Cons|derat|ons 28

6. Þrogram kev|ews 32

7. Cost-Sav|ng In|t|at|ves Summary 44

Append|x A: 8as|c In|t|at|ves 47

Append|x 8: Add|t|ona| kecommendat|ons 81

L|st of Acronyms 83


1


1. 8ACkGkCUND AND CVLkVILW

A Leam of professlonals headed by Cary u. Alexander wlLh experlence leadlng Lwo sLaLe
welfare asslsLance agencles LhaL resulLed ln beLLer ouLcomes and slgnlflcanL savlngs, Lhe
Alexander Croup (AC) has been engaged by Lhe 8ureau of LeglslaLlve 8esearch of Lhe Arkansas
Ceneral Assembly Lo conducL a prellmlnary revlew of Arkansas's welfare programs, Lo offer
prellmlnary shorL-Lerm lnlLlaLlves for conslderaLlon, and Lo provlde an overvlew of program-
lnLegrlLy lnlLlaLlves. 1hls reporL provldes a summary of Lhe flndlngs and recommendaLlons,
lncludlng an overvlew and a roadmap Lo help Lhe Ceneral Assembly lnlLlaLe cosL savlngs and
begln a dlscusslon on welfare reform.

1hls reporL provldes prellmlnary revlews and recommendaLlons. 1he Alexander Croup
delved lnLo as many deLalls as posslble. Cf necesslLy, glven Lhe enormlLy and complexlLy of
publlc-welfare programs, Lhe Alexander Croup focused lLs aLLenLlon on Lhe mosL prevalenL and
common elemenLs Lo provlde Arkansas a head sLarL on cosL savlngs and reform lnlLlaLlves. A
number of complex and Llme-consumlng analyses had Lo be seL aslde as Lhey would requlre a
more Lhorough revlew, whlch Lhe Alexander Croup also recommends. ln addlLlon, Lhe
Alexander Croup ls lncludlng recommendaLlons for addlLlonal reforms, lncludlng longer-range
welfare reform LhaL wlll slgnlflcanLly bend welfare-cosL Lra[ecLorles downward.


Scope of Work

Speclflcally, Lhe conLracL deLalled Lhe followlng scope of work:

1. Þrellmlnary revlew of Lhe publlc-welfare programs admlnlsLered by Lhe SLaLe of
Arkansas, lncludlng appllcable rules, regulaLlons, ellglblllLy llmlLs, and cosL drlvers. 1he emphasls
of Lhls revlew wlll be on Medlcald. lL ls anLlclpaLed LhaL Lhe resulLs of Lhls revlew wlll be
employed Lo develop savlngs and efflclency opLlons for leglslaLlve leaders Lo conslder ln Lhelr
efforLs Lo enhance Lhe programs and overall Laxpayer value.

2. Cffer prellmlnary shorL-Lerm lnlLlaLlves Lo asslsL Lhe leglslaLure ln addresslng budgeL
lssues wlLh an emphasls on Lhose lLems LhaL may be lmplemenLed wlLh mlnlmal federal
approval. Maln focus wlll be ln Lhe followlng areas:
• Medlcald
• 1Anl
• SnAÞ
• Chlld-Care asslsLance
• CperaLlons and AdmlnlsLraLlon

3. Cvervlew of Lhe currenL program-lnLegrlLy pracLlces.

2
ln fulflllmenL of Lhe Lerms of Lhe conLracL and ln order Lo dellver Lo Arkansas Laxpayers
Lhe maxlmum reLurn on lnvesLmenL (8Cl), Lhls reporL provldes flndlngs and recommendaLlons
ln Appendlx A LhaL can be falrly easlly adopLed LhaL wlll noL only provlde shorL-Lerm savlngs buL
also wlll lmprove admlnlsLraLlon and ouLcomes of welfare programs. Appendlx 8 provldes Lwo
addlLlonal lnlLlaLlves LhaL are more lnvolved buL wlll also provlde cosL savlngs and lmprove
quallLy. 8eyond Lhese speclflc recommendaLlons, Lhe reporL provldes recommendaLlons for
more subsLanLlve reform LhaL wlll resulL ln even beLLer ouLcomes, alLerlng Lhe currenL cosL
Lrend, ease Lhe welfare burden, and provlde serlous rellef Lo Lhe Arkansas sLaLe budgeL.


Cverv|ew of the Med|ca|d-We|fare System

ln general, Arkansas's sysLem ls no dlfferenL Lhan any oLher sLaLe. Welfare sysLems ln
Amerlca have been creaLed sporadlcally on a plecemeal basls, as programs have been layered
on Lop of each oLher by a comblnaLlon of federal and sLaLe laws, regulaLlons, and rules. 23(
4#"5'-( 6"575+#8(9'% #" 65#"#1'5- capLures ln a nuLshell Lhe sLaLe of affalrs: º1he u.S. welfare
sysLem would be an unllkely model for anyone deslgnlng a welfare sysLem from scraLch. 1he
dozens of programs LhaL make up Lhe 'sysLem' have dlfferenL (someLlmes compeLlng) goals,
lnconslsLenL rules, and over-lapplng groups of beneflclarles."
1


1he challenge ls Lo redeslgn Lhe sysLem Lo flL Lhe unlque needs and people of Arkansas.
Lvery sLaLe has lLs own sLrengLhs and weaknesses, and Lhe degree Lo whlch each sLaLe
mlnlmlzes sysLemlc deflclencles also varles. Moreover, all sLaLes have opporLunlLles Lo lmprove
organlzaLlonal sLrucLure, program deslgn, and coordlnaLlon. Cverall Lhe naLlon ls grappllng wlLh
sysLemlc challenges, and sLaLes are generally seeklng enhanced soluLlons Lo solve problems
relaLed Lo cosL and quallLy. 1he recommendaLlons ln Lhls reporL wlll asslsL Arkansas Lo reallze
slgnlflcanL lmprovemenLs, become more efflclenL, and save money.

Llke oLher sLaLes, Lhere ls no slngle enLlLy ln Arkansas responslble for Lhe enLlre publlc-
welfare sysLem. Þrovldlng asslsLance for Lhe varlous needs of food, shelLer, cash asslsLance,
chlld care, healLh care, energy, LransporLaLlon, and speclal needs are dlvlded among federal and
sLaLe programs and spread across a mulLlLude of agencles, lncludlng 144 acLlve houslng
auLhorlLles.

8y comparlson, Arkansas shows a hlgher level of lnLegraLlon ln sLaLe-run programs Lhan
oLher sLaLes, alLhough Lhe ldeal arrangemenL would be Lo house all publlc-welfare servlces ln
one agency. 1he ueparLmenL of Puman Servlces (uPS) handles mosL sLaLe-run programs, wlLh
Lhe noLable excepLlon of 1Anl ln Lhe ueparLmenL of Workforce Servlces (uWS), chlld-supporL

1. lnLroducLory senLences on Lhe Loplc of ºwelfare" by 1homas MaCurdy and !effrey M. !ones. 1homas
MaCurdy ls Lhe uean WlLLer senlor fellow aL Lhe Poover lnsLlLuLlon and a professor of economlcs aL
SLanford unlverslLy. Pe ls a member of sLandlng commlLLees LhaL advlse Lhe C8C, Lhe u.S. 8ureau of
Labor SLaLlsLlcs, and Lhe u.S. Census. !effrey M. !ones ls a research fellow aL Lhe Poover lnsLlLuLlon.
Pe was prevlously execuLlve dlrecLor of Þromlsed Land LmploymenL Servlce.

3
enforcemenL ln Lhe ueparLmenL of llnance and AdmlnlsLraLlon, and Women, lnfanLs & Chlldren
(WlC) ln Lhe ueparLmenL of PealLh. WlLhln uPS, Lhe ulvlslon of CounLy CperaLlons (uCC) plays a
cruclal role. 1hls dlvlslon provldes case managers Lo help asslsL lndlvlduals Lo navlgaLe Lhe
sysLem and deLermlne flnanclal ellglblllLy for mosL of Lhe food programs, energy asslsLance,
healLh care, and emergency-shelLer granLs. ln addlLlon, uCC deLermlnes flnanclal ellglblllLy for
Lhe 1ranslLlonal LmploymenL AsslsLance Þrogram (1LA).

AdmlnlsLerlng Lhe Medlcald program ls Lhe prlmary responslblllLy of Lhe ulvlslon of
Medlcal Servlces (uMS). lL shares Lhls responslblllLy wlLh four oLher dlvlslons wlLhln uPS and
Lhe unlverslLy of Arkansas. uCC deLermlnes flnanclal ellglblllLy and manages enrollmenL for
Medlcald programs and also operaLes Medlcald LllglblllLy CuallLy ConLrol (MLCC) 1113 Walver
ÞlloL program, a research and demonsLraLlon pro[ecL almed aL enhanced monlLorlng of Lhe
auLomaLlc renewal process. 1he ulvlslon for Medlcal Servlces (uMS) runs Lhe sLandard Medlcald
program, lncludlng Long 1erm Care. 1he ulvlslon of Aglng and AdulL Servlces (uAAS) oversees
Lhree federally-approved home- and communlLy-based programs for Medlcald reclplenLs as
alLernaLlves Lo lnsLlLuLlonal care operaLed by uMS esLlmaLed aL nearly $120 mllllon for Sl?
2012. 1he ulvlslon uevelopmenLal ulsablllLles Servlces (uuuS) admlnlsLers Lhe AlLernaLlve
CommunlLy Servlces Walver aL an esLlmaLed cosL of $167 mllllon for Sl? 2012. 1he ulvlslon of
Chlldren & lamlly Servlces (uClS) operaLes Lhe 1lLle lv-L Walver LhaL provldes varlous servlces
relaLed Lo losLer Care. 1he unlverslLy of Arkansas Medlcal Servlces ÞarLner runs Lhe program
for auLlsm aL an esLlmaLed cosL of $2.9 mllllon for Sl? 2013.

uCC provldes flnanclal ellglblllLy for Lhe 1ranslLlonal LmploymenL AsslsLance Þrogram
(1LA), buL Lhe ueparLmenL of Workforce Servlces admlnlsLers Lhe program. Chlld-care servlces
are admlnlsLered solely by Lhe ulvlslon of Chlld Care & Larly Chlldhood LducaLlon (uCCLCL).

WlLh Lhe excepLlon of Lhe Women lnfanL Chlldren (WlC) program run by Lhe
ueparLmenL of PealLh (uCP), uCC manages Lhe food-asslsLance programs: SupplemenLal
nuLrlLlon AsslsLance Þrogram (SnAÞ, formerly called Lhe lood SLamp Þrogram), Lmergency
lood AsslsLance, and Lhe CommodlLy ulsLrlbuLlon Þrogram. Arkansas ls responslble for
admlnlsLerlng Lhe SnAÞ program and shares ln Lhe admlnlsLraLlve cosLs. SnAÞ beneflLs are
funded enLlrely by Lhe lederal governmenL.

uCC operaLes Lwo energy programs-Pome Lnergy AsslsLance Þrogram (PLAÞ) and Lhe
WeaLherlzaLlon AsslsLance Þrogram (WAÞ)-and manages Lhe CommunlLy Servlces 8lock CranL
Þrogram and Lhe 8efugee 8eseLLlemenL Þrogram. 1ransporLaLlon asslsLance ls provlded by boLh
Lhe 1LA program and Lhe Medlcald program.

Pouslng ls admlnlsLered excluslvely by Lhe u.S. ueparLmenL of Pouslng and urban
uevelopmenL (Puu) Lhrough local houslng auLhorlLles, and Lhere ls vlrLually no lnLeracLlon

4
beLween sLaLe agencles and Lhese auLhorlLles. Puu llsLs 144 acLlve houslng auLhorlLles ln
Arkansas wlLh 14,672 low-renL unlLs.
2


CLher dlvlslons wlLhln uPS noL menLloned lnclude Lhe 8ehavloral PealLh Servlces,
CommunlLy Servlce and nonproflL SupporL, Servlces for Lhe 8llnd, and ?ouLh Servlces.

Arkansas ls requlred Lo lnLeracL wlLh no less Lhan sevenLeen federal agencles for Lhe
admlnlsLraLlon of welfare asslsLance programs. Some agencles are crlLlcally lmporLanL Lo Lhe
funcLlon of programs and requlre Lhe sLaLe Lo seek federal approvals for changes. Among Lhe
mosL lmporLanL are Lhe CenLers for Medlcare and Medlcald Servlces (CMS), Lhe lood and
nuLrlLlon Servlce (lnS), AdmlnlsLraLlon for Chlldren and lamllles (ACl), and Lhe SubsLance
Abuse and MenLal PealLh Servlces AdmlnlsLraLlon (SAMPSA). CLher agencles lnclude Soclal
SecurlLy AdmlnlsLraLlon (SSA), lmmlgraLlon and CusLoms LnforcemenL (lCL), PealLh 8esources
and Servlces AdmlnlsLraLlon (P8SA), AdmlnlsLraLlon on Aglng (AoA), veLeran Affalrs (vA), Lhe
Cfflce of lnspecLor Ceneral (ClC), and Lhe ueparLmenL of Lnergy (uCL). Some federal agencles,
such as Lhe ueparLmenL of Pouslng and urban uevelopmenL (Puu), have very llLLle lnLeracLlon
wlLh sLaLe agencles buL play a crlLlcal role ln admlnlsLerlng welfare-asslsLance programs.

Arkansas has several unlLs and processes LhaL monlLor and address program lnLegrlLy
and overslghL processes, many of Lhem federally requlred. 1he Alexander Croup found many
processes Lo be effecLlve, buL Lhere are opporLunlLles for lmprovemenL.

1o successfully operaLe varlous welfare programs requlres cooperaLlon and coordlnaLlon
among Lhe organlzaLlonal sLrucLures, whlch can be achleved Lhrough boLh formal and lnformal
arrangemenLs. Several dlvlslons have formallzed coordlnaLlon wlLh slgned agreemenLs, ln oLher
cases, lnformal cooperaLlon exlsLs. We dlscovered slgnlflcanL efforLs Lo Lhls end, buL Lhere
remalns room for lmprovemenL and, as ls ofLen Lhe case wlLh large organlzaLlons, sLrucLure can
llmlL effecLlveness.


2. u.S. ueparLmenL of Pouslng and urban uevelopmenL
(hLLps://plc.hud.gov/plc/haproflles/haprofllellsL.asp, !une 12, 2013). uaLa derlved from
programmaLlc reporLs complled from Puu 32681-8 forms made avallable ln MS-Lxcel onllne:
hLLp://porLal.hud.gov/hudporLal/Puu?src=/program_offlces/publlc_lndlan_houslng/programs/hcv/
psd.

3


2. 1nL 8UkDLN CI 1nL MLDICAID-WLLIAkL S¥S1LM


1he Costs of the System

Welfare-asslsLance programs, Medlcald ln parLlcular, have become Lhe mosL slgnlflcanL
expendlLure for Arkansas. Medlcald ecllpsed baslc educaLlon (klndergarLen Lhrough LwelfLh
grade) as Lhe largesL sLaLe expendlLure ln Sl? 2002. 1hls ecllpslng occurred sooner for Arkansas
Lhan lL dld for Lhe overall sLaLe average when Medlcald overLook baslc educaLlon for Lhe flrsL
Llme ln 2004, even before Lhe naLlonal average. SubsequenLly, Lhe expendlLures ran falrly close
LogeLher unLll 2009 when Medlcald declslvely Look Lhe lead poslLlon. See Lhe graph below.


Medlcald expendlLures have been undergolng a growLh raLe more Lhan Lwlce Lhe raLe of
Lhe resL of Lhe budgeL slnce Sl? 1983, chosen as Lhe base year because lL was Lhe flrsL year Lhe
naLlonal AssoclaLlon of SLaLe 8udgeL Cfflcers (nAS8C) publlshed lLs reporL on sLaLe
expendlLures. ln sLaLe funds, Arkansas Medlcald grew from $99 mllllon ln Sl? 1983 Lo an
esLlmaLed $1.294 bllllon for Sl? 2012, a 1,207 percenL lncrease. lor Lhe resL of Lhe sLaLe
budgeL, sLaLe funds grew only 306 percenL. ln Lerms of federal funds, Medlcald grew from $270

6
mllllon ln Sl? 1983 Lo an esLlmaLed $3.161 bllllon, 1,071-percenL lncrease compared Lo 433
percenL for Lhe resL of Lhe sLaLe budgeL. 1he flrsL Lable below provldes budgeL daLa LhaL was
reporLed Lo nAS8C for Arkansas. Also relylng ln daLa reporLed Lo nAS8C, Lhe ple charL
lllusLraLes Lhe slze of Medlcal Servlces Lo Lhe resL of Lhe uPS budgeL. Spendlng on Medlcal
Servlces ls greaLer Lhan all oLher uPS spendlng, comprlslng 83 percenL.



SLaLe
lunds
lederal
lunds
1oLal
lunds
SLaLe
lunds
lederal
lunds
1oLal
lunds
SLaLe
lunds
lederal
lunds
1oLal
lunds
SLaLe
lunds
lederal
lunds
1oLal
lunds
1983 99 270 370 2,140 386 2,726 2,239 836 3,096 4.4° 31.3° 12.0°
1992 223 692 917 3,933 928 4,863 4,160 1,620 3,780 3.4° 42.7° 13.9°
2002 626 1,663 2,289 7,934 1,798 9,732 8,360 3,461 12,021 7.3° 48.0° 19.0°
2012 (esL.) 1,294 3,161 4,433 12,961 3,133 16,096 14,233 6,296 20,331 9.1° 30.2° 21.7°
lrom
1983 1207° 1071° 1104° 306° 433° 490° 337° 636° 364°
1992 473° 337° 386° 229° 238° 231° 243° 289° 236°
2002 107° 90° 93° 63° 74° 63° 67° 82° 71°
noLe: (1) 1oLal 8udgeL excluse of bond flnanclng.
!"#$%&$& ()*+,- .$-$ $& /,01"-,* -1 -2, 3$-41%$5 !&&164$-41% 17 8-$-, ()*+,- 97746,"&
Sl?
Lndlng
Medlcald 1oLal 8udgeL
1
Medlcald
Mllllons of uollars ÞercenL Lo 1oLal
ÞercenLage CrowLh Lo Sl? 2012 (esLlmaLed)
8esL of 8udgeL

7

Þubllc-asslsLance programs have also been growlng fasLer Lhan Lhe resL of Lhe budgeL,
buL noL as fasL as Medlcald. nAS8C publlshes daLa on publlc-asslsLance programs, someLlmes
referred Lo as cash asslsLance. Whlle publlc asslsLance grew ln nomlnal dollars, Lhe Lable above
reveals lL has sLablllzed aL around 2.4 percenL of Lhe overall sLaLe.

A more sophlsLlcaLed way Lo analyze budgeL daLa ls Lo remove Lhe lmpacL of lnflaLlon Lo
compare consLanL dollars, and Lhen compare LhaL resulL Lo Lhe populaLlon growLh. 1he Lable
below demonsLraLes LhaL growLh for Lhe Medlcald and cash programs. Lven afLer ad[usLlng for
lnflaLlon, Lhe Arkansas budgeL has more Lhan doubled slnce 1983 whlle Lhe sLaLe populaLlon
grew only 27 percenL. A ma[or conLrlbuLor Lo Lhe growLh, boLh ln Lerms of magnlLude and
percenLage change, has been Medlcald. Cver LhaL same perlod, publlc-asslsLance growLh
exceeded LhaL of Medlcald, buL publlc asslsLance ls only abouL 11 percenL of Lhe slze of
Medlcald Loday, Lhus publlc asslsLance ls a less-slgnlflcanL cosL drlver.


locuslng on Lhe pasL Len years, Medlcald has grown 32 percenL, when ad[usLed for
lnflaLlon, ouLsLrlpplng overall budgeL growLh and exceedlng by far Lhe 9-percenL growLh ln sLaLe
populaLlon over Lhe same Llme span. 1he flrsL charL on Lhe nexL page lllusLraLes Lhe budgeL
overall growLh and Lhe degree Lo whlch Medlcald ls commandlng a conLlnually larger porLlon of
Arkansas's budgeL. 1he second charL on Lhe same page hlghllghLs uPS budgeL. Spendlng on
Medlcal Servlces has doubled ln Len years and Lrlpled ln LhlrLeen years.

1he growLh for Medlcal Servlces ls nearly double Lhe growLh raLe of Lhe resL of Lhe sLaLe
budgeL. ln maLhemaLlcal Lerms uslng a sLandard llnear-regresslon analysls (and dlsplayed on
page 9) Lhe growLh raLe of Medlcal Servlces has a slope of 0.1321, relaLlve Lo a slope of 0.0831
for Lhe resL of Lhe budgeL.
!"#"$
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/012 /3 40 50 3678 5678 /658
/004 1/ /52 4/9 /608 1658 56:8
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8


The Alexander Group
"#$%#&
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Real Arkansas Budget Growth in Magnitude & Percent
/0123 41215 678951 :;33 <7=8>?
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9


A common way Lo puL budgeL growLh ln perspecLlve ls Lo vlew lL ln Lerms of Lhe cosL
per-person and Lhe slze of Lhe economy. 8oLh meLhodologles yleld slmllar resulLs for Arkansas.
Þersonal lncome ls a common way Lo measure Lhe slze of a sLaLe economy. ln 1983, Lhe LoLal
Arkansas budgeL was 12.3 percenL of Lhe sLaLe personal lncome. 8y 2012, lL grew Lo absorb 20.3
percenL of Lhe economy. 1hls growLh demonsLraLes LhaL publlc-welfare programs are uLlllzlng
more economlc resources Lhan ever. AnoLher way Lo measure LhaL growLh ls Lo compare Lhe
lnflaLlon-ad[usLed budgeLs Lo Lhe LoLal populaLlon uslng a per-caplLa measuremenL. 1he charL
on page 10 quanLlfles LhaL measure ln lnflaLlon-ad[usLed dollars. Cn a per-caplLa basls, Lhe LoLal
cosL for Medlcald and publlc asslsLance ln 2012 was an esLlmaLed $1,678. ln 1983, Lhe per-
caplLa cosL ln 2012 dollars (ad[usLed for lnflaLlon) was less Lhan $400. noL shown on Lhe graph,
Lhe LoLal Arkansas budgeL, on a per-caplLa basls, ls an esLlmaLed $6,982.

10

A flnal way Lo demonsLraLe Lhe burden of publlc welfare ls Lo compare Lhe number of
employed Arkansans relaLlve Lo Lhe number of Arkansans recelvlng asslsLance. 1he charL on
page 11 esLlmaLes LhaL burden. AlLhough uPS daLa lndlcaLe 823,803 Medlcald reclplenLs and
693,364 SnAÞ reclplenLs ln 2011-12, uPS was unable Lo produce an undupllcaLed number of
reclplenLs across all welfare programs ln a Llmely manner for Lhls reporL. uslng Lhe paLLern of
elghL oLher sLaLes LhaL had provlded us wlLh undupllcaLed numbers of welfare reclplenLs,
3
we
deLermlned, on average, LhaL addlng 40 percenL of SnAÞ reclplenLs onLo Lhe Medlcald
enrollmenL ylelds a prellmlnary approxlmaLlon of Lhe undupllcaLed number of welfare
reclplenLs. Applylng LhaL same formula Lo Arkansas compuLes an undupllcaLed number of
welfare reclplenLs of 1,103,000.

1he charL dlsplays Lwo employmenL measures: LoLal employmenL and prlvaLely
employed persons. Accordlng Lo Lhe u.S. 8ureau of Labor SLaLlsLlcs, LoLal employmenL ln
Arkansas was 1,176,400 ln 2011-12. 1hls glves us Lhe followlng raLlo: each employed Arkansan
supporLs 0.94 reclplenLs on welfare. MosL sLaLes LhaL we have looked aL en[oy a slgnlflcanLly
hlgher number of employed lndlvlduals relaLlve Lo Lhose recelvlng welfare beneflLs, our
prellmlnary naLlonal esLlmaLe suggesLs beLween 1.8 and 2.0 workers, dependlng on Lhe LoLal-

3. 1he sLaLes are llorlda, Ceorgla, Malne, Mlchlgan, MlnnesoLa, new Pampshlre, Þennsylvanla, and
uLah.

11
employmenL measured used, supporLlng every welfare reclplenL. 1hls means Lhe burden ls
slgnlflcanLly heavler ln Arkansas. 1he prlvaLe-employmenL meLrlc furLher lllusLraLes a
dlsproporLlonaLely hlgh welfare burden ln Arkansas. lor each prlvaLely employed Arkansan, we
esLlmaLe 1.13 persons recelvlng some form of welfare asslsLance.

1he charL on Lhls page does noL accounL for Lhe pro[ecLed expanslon of Medlcald. uPS ls
esLlmaLlng anoLher 230,000 persons, or a 30-percenL lncrease ln enrollmenL. 8uL accordlng Lo
Lhe flrsL charL on page 12, afLer Lhe expanslon, Lhe number of Arkansans on Medlcald wlll
exceed Lhe Sl? 2011-12 number of Arkansans worklng ln Lhe prlvaLe secLor.



! "# $%#&'()#* , *-./
For each privately employed person in Arkansas,
there are an estimated 1.15 persons who are
receiving welfare assistance.
Estimated economic burden on employed persons
NC1L: ÞkLLIMINAk¥ LS1IMA1LS ICk WLLIAkL kLCIÞILN1S.
Each employed person
1
in Arkansas
supports an estimated 0.94 persons who
are receiving welfare assistance.
Note: (1) Employment as measured by total nonfarm employment per the U.S. Bureau of Labor Statistics.
9S9,900
1,103,000
82S,803
693,S64
216,S00
0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000
Nonfarm Lmp|oyment
We|fare kec|p|ents
Med|ca|d Lnro||ment
SNAÞ kec|p|ents
SI¥ 2011-12 Arkansas Data
Þr e | | m| nar y Ls t | mat e
Þr|vate Lmp|oyment
Government
Lmp|oyment

12




0.490
0.363
0.613
0.662
0.710
0.738
0.811
0.871
0.933
1.004
1.079
0.432
0.438
0.484
0.313
0.344
0.379
0.617
0.661
0.708
0.739
0.813
0.872
0.934
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$934 8llllon ln LxpendlLures ln llscal ?ear 2022-23
$484 8llllon ln LxpendlLures ln llscal ?ear 2012-13
;<=567>0?95@ H549:I
F/?J:5 >6 +" K549@
1
lorecasL exLended Lhree years uslng
$1.1 1rllllon ln LxpendlLures ln llscal ?ear 2022-23
;<=567>0?95@
L/95 A146
F/?J:5 >6 +"
K549@
M>01 N:: 30405@
;<=467>6O L57>D4>7
M>01 H/
L57>D4>7 ;<=46@>/6

13
Med|ca|d Spend|ng Þro[ect|ons

8epuLable forecasLs show LhaL Lhe growLh ln Medlcald spendlng wlll llkely acceleraLe.
Already, Medlcald covers an lncreaslng amounL of healLh care aL boLh Lhe beglnnlng and end of
llfe. ln Arkansas, Medlcald pays for roughly Lwo-Lhlrds of blrLhs and roughly 70 percenL of
nurslng-home care. Conslderlng Medlcald expanslon pursuanL Lo Lhe federal Affordable Care
AcL and wlLhouL ma[or reform of Lhe sysLem, Medlcald spendlng ls pro[ecLed Lo lncrease even
more dramaLlcally. 1he Alexander Croup was noL conLracLed Lo make an lndependenL forecasL
of Medlcald spendlng for Arkansas, buL Lhe Cfflce of Lhe AcLuary for Lhe u.S. ueparLmenL of
PealLh and Puman Servlces dld make a forecasL for Lhe naLlon, showlng LhaL Medlcald
expendlLures wlll more Lhan double over Lhe nexL Len years, as shown ln he Lable below:




A slmple forecasL uslng budgeL Lrends and PPS Medlcald forecasLs predlcLs LhaL
Arkansas wlll need anoLher $13.9 bllllon ln revenue ln Len years Lo meeL budgeL demands even
wlLhouL Lhe Medlcald expanslon. Cver Lhe pasL Len years, Lhe Arkansas budgeL, excludlng
Medlcald, grew 63 percenL. lf Lhls growLh raLe conLlnues, Lhen Lhe LoLal sLaLe budgeL wlll reach
$36.4 bllllon ln Sl? 2022, of whlch 26.9 percenL wlll be Medlcald. Conslderlng economlc and
flscal facLors, Lhls growLh wlll noL llkely be reallzed. lnsLead, lL ls very reasonable Lo expecL LhaL
Lhe resL of Lhe budgeL wlll noL be able Lo grow aL Lhe same pace, Lhus glvlng Medlcald a far
larger share of Lhe LoLal budgeL Lhan Lhe predlcLed 26.9 percenL. 1haL means conLlnued
reducLlon or forced cuLs ln oLher sLaLe programs and servlces. 8ased on Lhese forecasLs, lL ls
reasonable Lo conclude LhaL Medlcald wlll conLlnue crowdlng ouL oLher sLaLe prlorlLles.

SomeLlmes an lncrease ln federal funds can help offseL Lhe budgeLary demand for publlc
welfare, buL recenL hlsLory shows oLherwlse. CrowLh raLes ln uPS spendlng have far ouLpaced
growLh ln revenue. Arkansas has been faclng decllnlng lederal Medlcal AsslsLance ÞercenLage
(lMAÞ), l.e., Lhe share of Lhe Medlcald program pald for by Lhe federal governmenL, lllusLraLed
ln Lhe flrsL charL on page 14. lurLhermore, lederal lunds lnformaLlon for Lhe SLaLes, a [olnL
pro[ecL of Lhe naLlonal Covernor's AssoclaLlon and Lhe naLlonal Conference of SLaLe
LeglslaLures, predlcLs LhaL Lhe lMAÞ for Arkansas wlll conLlnue Lo decllne. Whlle avallable
analyses show Arkansas wlll galn federal funds wlLh Medlcald expanslon, Lhe complexlLy of Lhe
ACA and Lhe uncerLalnLy of forecasLlng suggesL LhaL galn wlll be shorL-llved. WlLhouL a
comprehenslve reform of Lhe Medlcald program, lL wlll conLlnue Lo be a flnanclal burden on Lhe
sLaLe. Conslderlng Lhe flscal problems of Lhe federal governmenL, anyLhlng ls posslble, lncludlng
less federal supporL for Medlcald ln Lhe fuLure.

!"#$%&$# '"() +, -.#/") 0+)&1 -.#/")
2342 56577 486398 236774 24:;<
2322 96=43 286822 >865>2 28:9<
!$11$+?( +, @+11&A(
BCD
<
!"#$%&$#
!"#$%& ()*&+,-. )/ 0*1,2-,- 3456&. "2 7&2 8&,*-

14



13
Cur budgeL-Lrend analysls shows LhaL Medlcald expendlLures ln sLaLe funds are growlng
Lhree Llmes fasLer Lhan sLaLe revenue. 1he second charL on page 14 compares Lhree growLh
raLes uslng Len-year daLa as Lhe base: Medlcal Servlces, Lhe resL of Lhe uPS budgeL, and non-
lederal 8evenue and 8ecelpLs. lor Lhe analysls, we lncluded federal money from Lhe Amerlcan
8ecovery and 8ehablllLaLlon AcL of 2009, whlch provlded sLaLes wlLh funds for Medlcal Servlces
LhaL would have normally been sLaLe funds. uslng sLandard llnear-regresslon analysls, Lhe slope
for Lhe medlcal-servlces growLh raLe ln sLaLe funds (0.1412) ls more Lhan Lrlple Lhe growLh raLe
for sLaLe (non-federal) revenue and recelpLs (0.0438). ln addlLlon, Lhe growLh-raLe slope for Lhe
remalnlng uPS budgeL ls 0.0868, nearly Lwlce Lhe raLe of non-federal revenue and recelpLs. 1hls
Lrend underscores Lhe need Lo flnd more efflclenL ways Lo admlnlsLer Medlcald and Lhe oLher
welfare programs.

1he flnal charL ln Lhls chapLer, on page 16, offers a prellmlnary pro[ecLlon of Lhe
Arkansas budgeL Lhrough Sl? 2022. Assumlng currenL Lrends and expanslon of Lhe Medlcald
populaLlon, we esLlmaLe Lhe Sl? 2022 budgeL wlll be $38.4 bllllon ln LoLal funds wlLh Medlcald
comprlslng 31 percenL of LhaL amounL. lor Lhls pro[ecLlon, we used Medlcald cosL expanslon
forecasL daLa provlded by uPS. 8ecause Lhls forecasL made Lhe unreallsLlc assumpLlon LhaL
program cosLs for Lhe expanslon populaLlon would sLagnaLe afLer 2017, we ad[usLed Lhe
forecasL by addlng Arkansas's hlsLorlc Medlcald growLh facLor for years 2018 Lo 2022. lor a
basellne comparlson, Lhe charL also shows how Lhe 2022 budgeL wlll look under currenL Lrends
wlLhouL Lhe expanslon. unless Arkansas experlences unprecedenLed economlc growLh over Lhe
nexL Len years, we belleve revenue wlll noL be able Lo susLaln Lhese cosL Lrends.

16


! "# $%#&'()#* , *-./ Preliminary 10-Year Projection of Arkansas Budget
!"#$% '#$#( )*+,(# -.%% /*0+123 .11*4(1 5*66(0# !6(0+1
789: );%%;"0 -<=>2
?(@3 A(+;B$;+ C(1# "D )*+,(#
E1#;4$#(+ FGFF )*+,(#37=H9I );%%;"0
FGJF )*+,(# E1#;4$#(3 7FG9H );%%;"0
J
E1#;4$#(+ FGFF )*+,(# K;#L
A(+;B$;+ EMN$01;"03 7=<9I );%%;"0
=J>
H8>
FO>
O=>
FF>
O<>
J
!"#" $%&'() +%' ,-., /0 #1) 2"#/%3"4 500%(/"#/%3 %+ $#"#) 6&78)# 9++/()'0: !"#"$ &'($)*+",-$ .$(/-"01 5(#&"4 ;&78)# )<())7)7 25$69 )0#/="#) ;> ?-@A 6/44/%3@

17


3. SCCICLCCNCMIC CCS1S AND DISINCLN1IVLS


ln Lhe 2009-2011 Annual Comprehenslve 8eporL for Lhe 1emporary AsslsLance for
needy lamllles (1Anl) publlshed by Lhe Arkansas ueparLmenL of Workforce Servlces llsL Lhe
followlng goals for 1Anl:
• Þrovlde asslsLance Lo needy famllles so LhaL chlldren may be cared for ln Lhelr own
homes or ln Lhe homes of relaLlves.
• Lnd Lhe dependence of needy parenLs on governmenL beneflLs by promoLlng [ob
preparaLlon, work, and marrlage.
• 8educe Lhe lncldences of ouL-of-wedlock pregnancles.
• Lncourage Lhe formaLlon and malnLenance of Lwo-parenL famllles.

1he reporL lLself provldes numerous programs, lncludlng [ob placemenLs, reLenLlon
raLes, hourly raLes, sancLlons, and deferrals. 1he reporL, however, does noL provlde a slngle
meLrlc Lo measure any of Lhese ma[or goals. 1here ls no lndlcaLlon on how successful welfare
programs have been Lo help chlldren Lo be cared for ln Lhelr own homes, or on Lhe overall
reducLlon on dependence on governmenL, Lhe reducLlon ln ouL-of-wedlock pregnancles and
blrLhs, or Lhe formaLlon and malnLenance of Lwo-parenL famllles.

1he good news ls LhaL Lhe u.S. Census 8ureau now provldes deLalled daLa from varlous
surveys, lncludlng Lhe Amerlcan CommunlLy Survey (ACS), enabllng researchers Lo answer
speclflc quesLlons abouL socleLal changes. 1he bad news ls LhaL our analysls of Lhe Census daLa
lndlcaLes LhaL "#"( of Lhe admlrable goals of 1Anl are belng meL. ln facL, Lhe soclal lndlcaLors
reveal LhaL Lhe overall well-belng of Lhe LargeL populaLlon has slgnlflcanLly decllned.

Arkansas Iam|||es w|th Ch||dren under 18 neaded
by Marr|ed or Unmarr|ed Þartner Coup|es

19S9 2011
Marr|ed Marr|ed
Marr|ed or
Unmarr|ed
Þartner
ln ÞoverLy 89.3° 19.0° 31.6°
noL ln ÞoverLy 97.3° 39.7° 43.4°

SLarLlng wlLh Lhe 1Anl goals of promoLlng marrlage and Lwo-parenL households, Lhere
are far fewer Lwo-parenL households ln Arkansas Loday Lhan ever. As Lhe Lable above lllusLraLes,
among famlly households, deflned by Lhe Census 8ureau as households wlLh chlldren under 18,
LhaL were llvlng ln poverLy ln 1939, 89.3 percenL were headed by marrled couples. As a maLLer
of comparlson, among famllles llvlng above Lhe poverLy llne ln 1939, 97.3 percenL were headed
by marrled parenLs. ln 2011, however, only 19 percenL of famllles ln poverLy were headed by

18
marrled couples. Cf famllles llvlng above Lhe poverLy llne ln 2011, 39.7 percenL were headed by
marrled couples, more Lhan double Lhe percenLage raLe. lf we expand Lhe deflnlLlon Lo lnclude
an unmarrled parLner, someLhlng unavallable ln Lhe 1939 long Census survey, only 31.6 percenL
of famllles wlLh dependenL chlldren are headed by marrled parenLs or an unmarrled couple.

A furLher query uslng 2011 ACS daLa, lllusLraLed ln Lhe flgure below, shows LhaL aL
lncomes above 300 percenL of Lhe poverLy level, a sllghL ma[orlLy are headed by marrled
couples, compared Lo 19 percenL for famllles beLween 0 percenL and 100 percenL. Also
apparenL from Lhe daLa, afLer some slmple arlLhmeLlc, 12.6 percenL of households wlLh chlldren
ln poverLy are headed by unmarrled parLners. 1hls percenLage dlmlnlshes as lncome rlses Lo be
[usL 1.1 percenL for households above 300 percenL of Lhe poverLy level.

Arkansas Iam|||es w|th Ch||dren under 18
by Þarenta|-Mar|ta| Status |n 2011
Income to
Þoverty kange
Marr|ed
Marr|ed or
Unmarr|ed
Þartner
No Þartner
0° Lo 100° 19.0° 31.6° 68.3°
101° Lo 133° 29.2° 33.7° 64.0°
134° Lo 200° 33.3° 38.8° 61.2°
201° Lo 300° 38.9° 42.7° 37.1°
301° Lo 400° 44.3° 46.3° 33.3°
401° Lo 300° 47.2° 48.3° 31.4°
301° and over 30.6° 31.7° 49.0°
All lncomes 34.9° 40.6° 39.4°

1he number of chlldren ln poverLy ls growlng. As Lhe flrsL charL on page 19 lndlcaLes,
21.8 percenL of chlldren under 18 ln Arkansas ln Lhe calendar year 2000 were classlfled as ln
poverLy by Lhe u.S. Census 8ureau. 8y 2011, Lhe percenLage had grown Lo 27.8 percenL. As Lhe
second charL on Lhe nexL page reveals, Lhe enLlre growLh ln Lhe populaLlon of Arkansas chlldren
over LhaL eleven-year perlod has come enLlrely from Lhose ln poverLy. ln facL, Lhere was a
negaLlve populaLlon growLh for chlldren noL ln poverLy.


19




Cne reason for Lhls Lrend ls Lhe dlfference ln blrLhraLes for women ln poverLy and
women noL ln poverLy. Cur analysls of ACS daLa shows LhaL Lhe hlgher Lhe household lncome,
Lhe lower Lhe blrLhraLe. lor famlly households ln poverLy wlLh moLhers beLween Lhe ages 13
and 30, 7.3 percenL gave blrLh Lo a chlld wlLhln Lwelve monLhs of Lhe 2011 Amerlcan
CommunlLy Survey. 1hls compares Lo only 2.3 percenL of households aL more Lhan 300 percenL
of Lhe poverLy level. See Lhe Lable on page 20.


20
Þercentage of Arkansas Women 8etween Ages 1S and S0
who Gave 8|rth w|th|n the Þast 12 Months of the 2011
Amer|can Commun|ty Survey of the U.S. Census 8ureau
Income to
Þoverty kange
Marr|ed
Coup|e
nouseho|d
Cther
nouseho|d
1ype
A||
nouseho|d
1ypes
0° Lo 100° 11.1° 6.3° 7.3°
101° Lo 133° 10.0° 2.8° 3.4°
134° Lo 200° 6.2° 4.0° 4.9°
201° Lo 300° 3.4° 2.4° 3.6°
301° Lo 400° 3.4° 1.0° 2.9°
401° Lo 300° 2.2° 0.0° 1.1°
301° and over 2.0° 2.9° 2.3°
All lncomes 6.6° 4.1° 3.0°

1he decllne of Lwo-parenL households, Lhe lncrease of ouL-of-wedlock blrLhraLes, and
Lhe rlse ln chlld poverLy ralse more quesLlons Lhan Lhls reporL can adequaLely address.
noneLheless, Lhe Census daLa do glve us serlous pause as Lo Lhe effecLlveness of welfare
programs on elLher of Lhese Lwo 1Anl goals. 1he daLa show 68.3 percenL of famllles aL 100
percenL or below Lhe poverLy Lhreshold fall shorL of Lhe goal of belng Lwo-parenL households
compared Lo 49 percenL for wealLhler famllles aL more Lhan 300 percenL of Lhe poverLy
Lhreshold. lf 1LA ls effecLlve, why Lhe large dlsparlLy?

1he Census daLa do suggesL LhaL 1Anl and 1LA are far from endlng Lhe ºdependence of
needy parenLs on governmenL beneflLs by promoLlng [ob preparaLlon, work, and marrlage."
lndeed, Lhe CounLy Cfflce CperaLlons 8eporL of 2013 lndlcaLes LhaL 1Anl caseload ls acLually
decllnlng (now a modesL 12,933 reclplenLs) whlle oLher welfare caseloads have lncreased. 1haL
SnAÞ now has caseload of 300,387 and Medlcal Servlces has a caseload of 684,384 underscores
LhaL Lhe welfare sysLem ls dolng less Lo promoLe lndependence Lhan dependency on oLher
Lypes of servlces beyond cash asslsLance.

Arkansas Iam|||es w|th Ch||dren under 18 kece|v|ng Med|ca|d or Iood
Stamps |n 2011 (ACS U.S. Census Data)

kece|ves
Iood
Stamps
Does Not
kece|ve
Iood
Stamps
1ota|
kece|ves Med|ca|d 26.7° 16.1° 42.8°
Does Not kece|ve
Med|ca|d
14.0° 43.2° 37.2°
1ota| 40.7° 39.3° 100.0°

kece|ves L|ther Med|ca|d or Iood Stamps 36.8°


21
Accordlng Lo 2011 ACS daLa, 36.8 percenL of famllles wlLh chlldren ln Arkansas recelve
elLher Medlcald or food sLamps, showed on Lhe Lable on page 20. WlLh more Lhan half of all
famllles wlLh chlldren on Medlcald or recelvlng food sLamps, lL ls dlfflculL Lo argue LhaL Lhe goal
of reduclng dependence on governmenL ls belng achleved.

8egardlng Lhe 1Anl goal of carlng of Lhe chlld ln hls or her home or ln Lhe home of a
relaLlve: Lhe prevalenL lnLerpreLaLlon ls LhaL Lhls means Lhe chlldren are safe Lo llve ln Lhe
homes of Lhelr parenLs or relaLlves as opposed Lo havlng Lo place Lhem ln fosLer care or ln some
form of lnsLlLuLlonal care, Lhe goal should noL be confused wlLh provldlng care when parenLs
work or Lraln. Chlld care ouLslde Lhe home does noL deLer from Lhls goal. 1he federal emphasls
has been promoLlng Lhls lnLerpreLaLlon wlLh Lhe slmulLaneous goal of encouraglng hlgh-quallLy
chlld-care seLLlngs.

ln Lerms of provldlng chlld-care servlces, however, Lhe sLaLe ls noL promoLlng Lhe ldea of
provldlng chlld care ln Lhe home or wlLh a relaLlve. SLandard forms for Lhe federal Chlld Care
and uevelopmenL lund clearly lndlcaLe LhaL sLaLe programs musL allow for Lhe opLlon of ln-
home care, deflned as care wlLhln Lhe home of Lhe chlld. lorms submlLLed Lo Lhe federal
governmenL by Lhe Arkansas ulvlslon of Chlld Care and Larly Chlldhood LducaLlon lndlcaLe LhaL
ln-home servlces would be provlded as long as Lhe ln-home care was llcensed or reglsLered.
Powever, Lhls sLaLemenL ls mlsleadlng because Lhe Arkansas chlld-care program does noL allow
Lhls opLlon. ln ll? 2012, Arkansas recelved $49.6 mllllon ln federal funds for Lhe chlld-care
program, whlch was maLched wlLh $4 mllllon ln sLaLe funds.

1o summarlze, socloeconomlc daLa provlde llLLle evldence LhaL any of Lhe four goals
ldenLlfled by uWS and esLabllshed by Þ8WC8A are belng achleved. 1he daLa lnsLead suggesL
reforms of Lhe currenL sysLem are needed, lncludlng Lhe esLabllshmenL of a dashboard meLrlc
sysLem Lo help leglslaLors and Lop execuLlves monlLor Lhe effecLlveness of Lhe welfare sysLem.


Imbedded D|s|ncent|ves

A well-known feaLure of publlc-welfare programs ls LhaL Lhey Lrap reclplenLs ln welfare
dependency. ln oLher words, Lhe sysLem has lmbedded economlc lncenLlves LhaL undermlne
Lhe goals achlevlng lndependence, Lhe sLaLed purposes of 1Anl. SLaLes, however, can work Lo
mlnlmlze Lhese dlslncenLlves Lo Lhe degree LhaL Lhey have Lhe laLlLude Lo do so. AddlLlonally,
federal law provldes opporLunlLles Lo seek walvers, and sLaLes are free Lo deslgn walver
requesLs Lo help faclllLaLe Lhe goal of reduclng Lhese dlslncenLlves. lndeed, when seLLlng up
Medlcald ln 1963, Congress expllclLly lnLended Lhe program, ln parL, ºLo help . . . famllles and
lndlvlduals aLLaln or reLaln capaclLy for lndependence or self-care." (42 u.S.C. § 1396)

1he 1Anl program was deslgned Lo reduce dependency as much as posslble. 1Anl relles
on a comblnaLlon of Lralnlng and Llme llmlLs, and Arkansas's program has some very sLrong
sLrengLhs. 1Anl, however, ls [usL one program and ls relaLlvely small ln Lerms of enrollmenL and
expendlLures compared Lo oLher programs. lor example, Lhe federal Larned lncome 1ax CredlL

22
ls a much larger cash asslsLance program for lower-lncome persons who secure employmenL.
1he federal SupplemenLal SecurlLy lncome (SSl) program has become a source of lncome for
famllles LhaL have chlldren classlfled as havlng a dlsablllLy. noLe LhaL noL all SSl dlsablllLles are
severe. Chlldren wlLh relaLlvely mlnor dlsablllLles, such as aLLenLlon-deflclL dlsorders, quallfy for
monLhly lncome, and ofLen Lhls lncome becomes cruclal Lo low-lncome households, so much so
LhaL sLudles and news reporLs have documenLed LhaL some 1Anl parenLs acLlvely pursue
havlng Lhelr chlldren dlagnosed as dlsabled.
4


Cn Lop of cash-asslsLance programs, famllles, elLher lndlvldually or collecLlvely, quallfy
for addlLlonal supporL. SnAÞ, formerly known as food sLamps, ls based on speclflc household
deflnlLlons and has become wldely avallable. Pouslng vouchers and publlc houslng are beneflLs
LhaL famllles can recelve and are compleLely ouLslde Lhe conLrol of sLaLe governmenL. Medlcald
ls a healLh beneflL LhaL ls avallable only Lo Lhose lndlvlduals LhaL meeL ellglblllLy requlremenLs
for dlsLlncL caLegorles. namely, ln addlLlon Lo meeLlng speclflc flnanclal caLegorles, Lhe
appllcanL generally needs Lo be a chlld under 18, elderly, dlsabled, wldowed, pregnanL, or
enrolled ln 1LA. llnally, parenLs are ellglble for chlld-care asslsLance, and dependlng on
household lncome, Lhe program may pay up Lo 100 percenL of Lhe cosL.

lL ls Lhe culmlnaLlon of Lhese beneflLs ln comblnaLlon wlLh earned lncome LhaL creaLes
Lhe economlc dlslncenLlves. lor example, as a household lncreases lLs gross earned lncome,
ldeally Lhe comblnaLlon of lLs neL lncome (afLer Laxes) and beneflLs should lncrease. uslng a
prellmlnary economlc model, lllusLraLed on Lhe flrsL charL on Lhe nexL page, we ran a scenarlo
for a household of Lhree conslsLlng of a slngle parenL wlLh Lwo chlldren, whlch represenLs a
Lyplcal 1LA household recelvlng welfare beneflLs ln Arkansas. 1he formulas used are based on
federal rules and Lables conslsLlng of Lhe lederal AnLl-ÞoverLy 1ax CredlLs (Larned lncome 1ax
CredlL and AddlLlonal Chlld 1ax CredlL). 1Anl Cash, SnAÞ, Pouslng Cholce vouchers, and Chlld-
care AsslsLance. We dld noL lnclude healLh-care beneflLs ln Lhls scenarlo. AlLhough Lhls
prellmlnary model can be reflned Lo produce addlLlonal scenarlos and more exacL numbers, lL ls
lllusLraLlve and demonsLraLes how economlc lncenLlves are worklng agalnsL Lhe famlly.
Accordlng Lo Lhls scenarlo, famlly's comblned neL lncome and beneflLs peak [usL under $44,000
when lL achleves earned gross lncome of $19,300, whlch ls approxlmaLely $9.38 per hour.
When Lhe parenL beglns Lo earn gross lncome beyond Lhe $19,300, Lhe comblned neL lncome
and beneflLs Lapers off provldlng no addlLlonal galn. AL abouL earned gross lncome of $29,300,
Lhe beneflLs of SnAÞ, houslng-cholce vouchers, and chlld-care asslsLance would cease, causlng a
loss of more Lhan $10,000 ln beneflLs. 1hls parenL would need Lo earn gross lncome of $44,000
before she could recover Lhe same level of comblned neL lncome and beneflLs when lL earned
[usL $19,300. Whlle Lhe acLual dollar amounLs and experlence of speclflc households would
vary, Lhe followlng lllusLraLlon demonsLraLes Lhe fundamenLal problem wlLh how Lhe LoLallLy of
welfare beneflLs creaLes economlc dlslncenLlves.

4. See, for example, Lhe Lhree-parL serles, º1he CLher Slde of Welfare" by ÞaLrlcla Wen, ºA Legacy of
unlnLended Slde LffecLs," 23( :#-&#" 0+#;(, uecember 12, 2010, ºA CoveLed 8eneflL: A lallure Lo
lollow up," uecember 13, 2010, and ºA Cruel ullemma for 1hose on Lhe Cusp of AdulL Llfe,"
uecember 14, 2010.

23




24
lurLher analysls demonsLraLes how Lhe dlslncenLlves undermlne Lhe 1Anl goals of
promoLlng marrlage and Lhe formaLlon and malnLenance of Lwo-parenL famllles. lf we add lnLo
Lhe economlc model Lhe second parenL, ln mosL cases Lhe faLher, we geL a revlsed scenarlo ln
Lhe second charL on page 23. As before, Lhe comblnaLlon of neL lncome and beneflLs peak aL
around $19,300, buL Lhere ls a very lmporLanL dlfference. lf boLh parenLs work and earn gross
lncome around mlnlmum wage or a llLLle blL more, Lhelr LoLal household gross lncome wlll llkely
fall wlLhln Lhe cllff area of Lhe charL, meanlng LhaL Lhey are sacrlflclng a slgnlflcanL amounL of
beneflLs. 1hls economlc model provldes evldence LhaL Lhe welfare sysLem dlscourages Lwo-
parenL famlly formaLlon. Comblned wlLh Lhe socloeconomlc daLa revlewed earller, Lhls model
suggesLs LhaL Lhe dlsparlLles beLween households ln poverLy and Lhose noL ln poverLy are parLly
unlnLended consequences of Lhe welfare sysLem lLself.

8eallgnlng Lhe economlc lncenLlves embedded ln Lhe welfare sysLem wlll requlre ma[or
reforms of Lhe welfare sysLem requlrlng flexlblllLy and approval from Lhe federal governmenL.
Such approval may Lake Lhe form of global walvers from mulLlple federal agencles or
congresslonal auLhorlLy. lL ls ouLslde Lhe scope of Lhls revlew Lo offer Lhe Alexander Croup's
comprehenslve approach of reallgnlng Lhe economlc lncenLlves and developlng a federal
sLraLegy. 1he nexL Lwo chapLers deLall reforms LhaL Arkansas mlghL conslder.



23


4. MAICk ÞCLIC¥-kLICkM kLCCMMLNDA1ICNS


Med|ca|d G|oba| Wa|ver

8ecause of Lhe complexlLy and burden of overlapplng federal and sLaLe laws, rules, and
regulaLlons, Lhe Lask of Lransformlng Lhe welfare sysLem lnLo an efflclenL operaLlon focused on
lndependence ls more dlfflculL Lhan changlng prlvaLe-secLor enLlLles. unllke successful
buslnesses LhaL qulckly learn from mlsLakes, adapL Lo new reallLles, and have Lo be accounLable
or else Lhey can fall, governmenLs can conLlnue for years operaLlng a sysLem under ouLdaLed
and mlsgulded assumpLlons. Lven ln Lhe face of clear program fallure, our Lop-down,
hlerarchlcal sysLem never calls for reexamlnaLlon or repeal of programs, only for Lhe addlng of
new levels of programmlng onLo an already bloaLed and dlsorganlzed sysLem.

1rue reform musL be based on a reexamlnaLlon of Lhe very assumpLlons of Lhe War on
ÞoverLy LhaL was announced by ÞresldenL Lyndon !ohnson nearly flfLy years ago. 8aLher Lhan
relylng upon Lhe so-called experLs who belleve Lhere ls no soclal or economlc problem
governmenL cannoL flx, Lrue reform calls for a governmenL LhaL respecLs Lhe naLural famlly as
Lhe fundamenLal soclal unlL, ensures resulLs Lhrough performance accounLablllLy, and promoLes
lnnovaLlon Lhrough compeLlLlon and creaLlvlLy. 8elnvenLed governmenL ls clLlzen-cenLered,
focuses on famlly responslblllLy, demands efflclency, uLlllzes resulLs-orlenLed performance
measures, and maxlmlzes markeL-based soluLlons where feaslble. CovernmenL musL be
modernlzed boLh ln personnel and Lechnology, lean, performance drlven, and accounLable Lo
Lhe Laxpayers.

1o help Arkansas adapL Lo a rapldly changlng world, lL ls our recommendaLlon LhaL
Arkansas pursue a global and comprehenslve redeslgn uLlllzlng one walver of lLs enLlre
Medlcald program. CurrenLly, Lhe sLaLe operaLes a myrlad of Medlcald walvers and sLaLe plan
amendmenLs LhaL do noL comporL across all programs. 1hese Lhousands of rules, servlce
deflnlLlons, and confllcLlng regulaLlons yleld operaLlonal chaos, cosL escalaLlon, lack of
Lransparency, and a preoccupaLlon wlLh formal compllance wlLh uncle Sam, noL beLLer healLh
ouLcomes for reclplenLs. ConsequenLly, a global redeslgn would noL only make Medlcald more
efflclenL, LransparenL, and accounLable buL also more accesslble Lo leglslaLors and even
Laxpayers. Moreover, Lhls opLlon would lmprove performance for employees and conLracLors,
ouLcomes for reclplenLs, and reallze slgnlflcanL cosL savlngs well beyond Lhe LhlrLy-Lwo
lnlLlaLlves ldenLlfled ln Lhe Appendlces.

A comprehenslve redeslgn of Lhe sLaLe Medlcald sysLem Lhrough a slngle walver ls noL
an lvory-Lower dream of pollcy experLs. ln 2009, Lhe SLaLe of 8hode lsland secured such a
walver from Lhe CenLers for Medlcare and Medlcald Servlces (CMS) LhaL exempLed Lhe sLaLe
from Lhe overklll of federal mlcromanagemenL ln exchange for a flve-year spendlng cap. 1haL

26
culLure-changlng, landmark lnlLlaLlve Lransformed a slugglsh sLaLe bureaucracy lnLo a
performance-drlven sysLem LhaL noL only lncreased access and cholce buL also lmproved care
quallLy and ouLcomes-whlle savlng Laxpayers approxlmaLely $100 mllllon. And 8hode lsland
broughL ln LoLal Medlcald spendlng aL bllllons of dollars below Lhe spendlng cap.

CLher sLaLes have achleved slmllar success ln bendlng Lhe Medlcald-spendlng curve. ln
lndlana, former Cov. MlLch uanlels creaLed Lhe PealLhy lndlana Þlan (PlÞ), an alLernaLlve
healLh-care plan for a group of Medlcald reclplenLs LhaL palred caLasLrophlc lnsurance wlLh a
Þersonal Wellness and 8esponslblllLy (or ÞCWL8) healLh-savlngs accounL for households wlLh
lncomes up Lo 200 percenL of Lhe federal poverLy level.

Clven Lhe pendlng expanslon of Lhe Medlcald sysLem demanded by Lhe Affordable Care
AcL, Lhere ls no beLLer Llme for a sLaLe llke Arkansas Lo pursue a global reform of Lhe broken
sysLem Lhan now. 1he Lop-down, one-slze-flLs-all bureaucraLlc model LhaL Lhe federal
governmenL has lmposed upon Lhe sLaLes Lhrough boLh Medlcald and Lhe ACA ls unsusLalnable.
?eL Arkansas can show leadershlp for Lhe naLlon by Laklng conLrol on her own resources and
posslbly even repurposlng savlngs for more promlslng uses-llke lnfrasLrucLure lmprovemenLs,
vocaLlonal Lralnlng, or Lax rellef Lo revlLallze lndusLry-LhaL can enhance economlc and [ob
prospecLs for all.


Comprehens|ve We|fare keform

Comprehenslve welfare reform goes beyond Lhe global walver for Medlcald Lo lnclude
all componenLs of Lhe welfare sysLem Lo address famlly and lndlvldual needs as lL relaLes Lo
food, houslng, chlld care, healLh care, LransporLaLlon, and speclal needs. 1he redeslgn ls
overarchlng and comprehenslve. lL keeps Lhose porLlons of Lhe currenL welfare sysLem LhaL are
worklng, buL lL wlll also compleLely resLrucLure oLher componenLs, merglng mulLlple programs
lnLo a coheslve sysLem. lL wlll noL make change for Lhe sake of change, buL lL wlll LargeL Lhose
areas where performance ouLcomes need lmprovemenL and where coheslveness ls lacklng wlLh
oLher programs.

ln Lhe flnal redeslgn, each reclplenL's slLuaLlon should be assessed relaLlve Lo needs,
lncludlng conslderaLlon of lncome and resources of hls or her famlly, and would be glven an
lndlvldual plan-speclflc Lo Lhe person's slLuaLlon-focused on compleLely movlng Lhe reclplenL
off Lhe welfare sysLem. 1he redeslgned sysLem wlll adhere Lo Lhe followlng prlnclples:

1. We|fare c||ffs are e||m|nated.
• lL acLlvely encourages progress Loward aLLalnlng self-sufflclency.
• lL encourages work
2. 1he system |s person and househo|d centered
• lL ls cusLomlzed Lo Lhe speclflc slLuaLlon
• lL ls needs-based

27
3. 1he system |s equ|tab|e
• Þersons above Lhe ellglblllLy llne are always beLLer off Lhan Lhose below lL even
afLer beneflLs are dlspensed.
4. Natura| supports, |nc|ud|ng fam|||a| re|at|onsh|ps, are encouraged
S. It promotes persona| respons|b|||ty and dec|s|on-mak|ng.
6. 1|me sens|t|ve
• 1he sysLem recognlzes how need changes wlLh Llme and adequaLely accounLs for
Lhose changes.
• 1he sysLem esLabllshes Llme-senslLlve mllesLones LhaL reclplenLs musL meeL on Lhelr
way Lo self-sufflclency.

Whlle Lhe global walver wlll dramaLlcally lmprove Lhe Medlcald program, Lhe
comprehenslve reform ls needed Lo dramaLlcally lmprove Lhe publlc-welfare sysLem. Powever,
preparlng a comprehenslve welfare reform ls more complex Lhan preparlng a global walver, as
lL musL lnclude a sLraLegy Lo secure approvals from Lhe federal governmenL, and no sLaLe has
yeL accompllshed Lhls Lask. noneLheless, comprehenslve reform offers Lhe only real promlse of
Lransformlng Lhe enLlre welfare sysLem. Arkansas mlghL conslder becomlng Lhe sLaLe Lo lead
Lhe way.


28


S. 8UDGL1Ak¥ CCNSIDLkA1ICNS


A revlew of budgeL documenLs relaLlng Lo publlc-welfare programs shows boLh
sLrengLhs and weaknesses. 1he program narraLlves, lncludlng Lhe sLaLuLory hlsLory and scope of
Lhe programs, are well done and beLLer Lhan oLher sLaLes we have revlewed. 1here are Lwo
large weaknesses. llrsL, Lhe budgeL documenLaLlon lacks performance measures. Second, lL
lacks lnlLlaLlves Lo lmprove ouLcomes and efflclency of operaLlons.


8udgetary and Þrogrammat|c Þerformance Measures

Arkansas organlzes lLs budgeL on a program basls whereby budgeLs are formulaLed and
approprlaLlons LhaL are made on Lhe basls of expecLed resulLs of servlces Lo be carrled ouL by
programs. MosL sLaLes, however, are movlng Lo lnLegraLe performance-based measures more
fully lnLo Lhelr budgeLlng processes. nAS8C deflnes performance budgeLlng as follows:

Þerformance budgeLs are consLrucLed by program buL focus on program goals and
ob[ecLlves, measured by shorL-Lerm ouLpuLs, pro[ecLed longer-Lerm ouLcomes, and
cosL/beneflLs analysls. ApproprlaLlons are noL only llnked wlLh programs, buL also wlLh
expecLed resulLs speclfled by Lhese performance crlLerla.

Moreover, nAS8C reporLs LhaL:

• 40 sLaLes collecL program-level performance measures,
• 39 sLaLes requlre performance measures as parL of each agency budgeL requesL,
• 31 sLaLes have budgeL agencles LhaL coordlnaLe performance measures,
• 29 sLaLes formally revlew or audlL performance measures on regular basls,
• 23 sLaLes uLlllze performance budgeLlng as a budgeLlng procedure.
5


Arkansas could beneflL by lnlLlaLlng sLeps Lo lnLegraLe performance measures lnLo lLs
budgeL process, especlally ln Lhe area of human servlces.

Þerformance measures are beneflclal aL more Lhan one level. loremosL, Lhey requlre
pollcymakers and Lop execuLlves Lo esLabllsh speclflc goals and provlde an ob[ecLlve way Lo
deLermlne wheLher programs are meeLlng Lhose goals. Second, Lhey enable program managers
Lo esLabllsh benchmarks for ouLcomes and efflclencles. 1hese ln Lurn can be monlLored by
audlLors and reporLed back Lo leglslaLors, helplng Lo faclllLaLe monlLorlng of program success.


3. naLlonal AssoclaLlon of SLaLe 8udgeL Cfflcers, :,9<(& =/#5(--(- #. &3( *&%&(-, Summer 2008.

29
Þubllc-welfare programs pose pecullar challenges for performance measures, as Lhe
sysLem was noL esLabllshed ln a manner conduclve for measurlng pollcy goals and performance.
1he varlous programs LhaL make up Lhe welfare sysLem were creaLed ln lnLervals and on a
plecemeal basls wlLh Lhe prlmary goals of deLermlnlng ellglblllLy and dlspenslng beneflLs. 1he
baslc reallLy ls Lhe welfare sysLem was esLabllshed prlor Lo Lhe developmenL of modern
compuLer Lechnology and lnLerrelaLlonal daLabases. Larly sLaLlsLlcs were llmlLed Lo LabulaLlons
and general descrlpLlons, negaLlng Lhe ablllLy for pollcymakers Lo deLermlne ouLcomes and
lmpacL ln a very meanlngful way.

1oday, however, lnformaLlon Lechnology enables boLh operaLlonal proflclencles and
pollcy analysls sulLable for leglslaLors and Lop execuLlves. 1hls developmenL provldes
pollcymakers wlLh an unprecedenLed opporLunlLy. 8y esLabllshlng proper meLrlcs and
managemenL Lechnlques pursuanL Lo well-deflned buslness goals, ouLcomes can be lmproved
for boLh reclplenLs whlle beLLer conLrolllng cosLs and program lnLegrlLy. ln general, sLaLes have
been movlng Loward developlng Lhelr sysLems so LhaL ouLcomes can be more lnLelllgenLly
managed and dlrecLed.

LsLabllshlng meanlngful performance measures LhaL are conslsLenLly capLured and
Lracked ls noL an easy Lask. 1o do lL rlghL requlres Lhe lnpuL of mulLlple sLakeholders aL varlous
sLages. llrsL, lL ls lmporLanL Lo have leglslaLlve leaders and Lop execuLlves commlLLed Lo
performance measurlng. WlLhouL supporL aL Lhe hlghesL levels, Lhe efforL wlll fall shorL of lLs
poLenLlal. Second, lL ls lmporLanL Lo revlew and perhaps redeflne program goals Lo reflecL
lmporLanL prlnclples and reallLles. Lxamples of Lhese overarchlng prlnclples lnclude person-
cenLered care for a person aL Lhe rlghL seLLlng aL Lhe rlghL Llme, promoLlng progresslon Loward
lndependence and fosLerlng personal responslblllLy. 1hlrd, sLaLe sysLems musL be seL up ln a
manner conduclve Lo capLure and Lrack Lhe necessary daLa, requlrlng cooperaLlon from
operaLlonal sLaff and Lechnologlcal capablllLles. lourLh, Lhe measures musL be lnLegraLed lnLo
Lhe operaLlonal sysLem so lL becomes parL of Lhe culLure. uashboards are exLremely helpful ln
Lhls regard because Lhey provlde consLanL remlnders, helplng gulde day-Lo-day declslons of
onllne sLaff. llfLh, Lhe resulLs need Lo be lncluded ln program audlLs and reporLed back Lo Lhe
leglslaLure. llnally, perlodlc revlews are needed Lo lmprove performance measures, revlse
program goals, and make programmaLlc ad[usLmenLs.

ln order Lo Lap lnLo Lhe poLenLlal, lL ls noL necessary Lo have a slngle daLabase, buL Lhe
daLabases need Lo be seL up lnLelllgenLly Lo allow querles across sysLems. 1o LhaL end, lL ls
cruclal LhaL Lhe sysLems esLabllsh a reclplenL ldenLlflcaLlon number. WlLhouL such a sLandard, lL
becomes dlfflculL Lo deLermlne even Lhe slmplesL lnformaLlon, such as Lhe number of beneflLs a
speclflc reclplenL mlghL be recelvlng, Lracklng Lhe reclplenL over Llme Lo follow progress, or Lo
effecLlvely query program resulLs on a macro scale. Arkansas has a daLa warehouse, and
conversaLlons wlLh key sLaff lndlcaLe LhaL Arkansas has Lhe ablllLy Lo query across sysLems.

We had requesLed from uPS an undupllcaLed counL of all welfare reclplenLs. 8ased on
conversaLlons wlLh uPS sLaff, lL seemed posslble Lo llnk up Lhe varlous daLabases Lhrough flelds
ldenLlfylng lndlvlduals. uPS, however, had noL dellvered Lhe answer by Lhe Llme of Lhls reporL's

30
publlcaLlon. We are noL cerLaln wheLher uPS does lndeed have Lhe capablllLy buL was unable Lo
generaLe Lhe daLa ln a Llmely manner or lf lL slmply does noL have Lhe Lechnlcal capablllLles.
WhaLever Lhe case, Lhere ls room for lmprovemenL ln uPS belng able Lo generaLe baslc pollcy
level daLa. lL should be common pracLlce Lo be able Lo generaLe Lhese daLa on a regular and
Llmely basls.

ln addlLlon, we sLrongly recommend LhaL Lhe sLaLe revlew all of lLs conLracL Lerms. 1here
are currenLly ln excess of $40 mllllon ln uPS conLracLs wlLh conLracL Lerms requlrlng Lhem Lo
provlde acLlve feedback, ensure quallLy of servlces, and Lo collecL and reporL daLa. Powever,
many daLa requesL were unable Lo be fulfllled for analysls ln Lhls reporL.

We sLrongly recommend LhaL Arkansas develop performance measures for budgeLlng,
programmaLlc, and managemenL purposes. More research needs Lo be done Lo verlfy
capablllLles, buL Arkansas appears Lo have many of Lhe pleces LhaL would enable lL Lo lnlLlaLe a
performance-based sysLem.


Cost-Sav|ngs 8udget-Þrocess In|t|at|ves

Whlle budgeL documenLaLlon does menLlon some cosL conLalnmenL efforLs, we
recommend LhaL cosL savlng lnlLlaLlves recelve a far more promlnenL role ln Lhe documenLaLlon.
lL ls wlLhln Lhe narraLlve secLlon of Lhe budgeL documenLaLlon where Lhese savlng lnlLlaLlves are
menLloned. lor example, page 419 of volume 9 of 8udgeL Summary lnformaLlon for Lhe 2013-
13 8lennlal 8udgeL sLaLes LhaL Lhe uMS Medlcald ºÞharmacy Þrogram conLlnues Lo lmplemenL
addlLlonal edlLs on medlcaLlons whlch serve Lo assure approprlaLe uLlllzaLlon and paLlenL safeLy,
and prevenL wasLe and abuse wlLh Lhe end resulL belng cosL conLalnmenL." Cn Lhe same page,
lL sLaLes: º1hlrd ÞarLy LlablllLy (1ÞL) collecLlons and cosL avoldance have doubled from 2007-
2009 ($28 mll. Lo $36 mll.)". Cn page 421, Lhe same volume sLaLes, º1he ulvlslon of Medlcal
Servlces ls on Lhe cuLLlng edge of dlscoverlng efflclencles Lo lmprove access Lo programs whlle
conLalnlng program cosLs." 1hroughouL Lhe documenL, Lhere are varlous oLher places where
speclflc processes or programs are menLloned LhaL promoLe efflclency and cosL savlngs.

Accordlng Lo Lhls documenLaLlon, Lhe Arkansas leglslaLure has enLrusLed uPS Lo be
responslble for seeklng efflclencles. As sLaLed on page 129 of Lhe same volume: º1he ulrecLor
has Lhe auLhorlLy Lo Lransfer or asslgn duLles or programs wheLher exlsLlng or new Lo offlces,
secLlons or unlLs as deemed necessary for efflclenL and necessary operaLlon of Lhe
deparLmenL." We belleve LhaL Lhls flexlblllLy ls a good Lhlng. Powever, when we lnqulred
wheLher Lhe dlrecLor had ever used Lhls power for Lhe beneflL of uPS, we were provlded wlLh
no lncldences where lL was ever used.

We recommend ralslng Lhe level of cosL savlngs by havlng Lhe leglslaLure requlre Lhe
execuLlve agencles Lo propose speclflc cosL-savlngs lnlLlaLlves wlLh each budgeL submlsslon.
1hese lnlLlaLlves need Lo lnclude brlef lnformaLlon on Lhe lnlLlaLlve and esLlmaLes of cosL
savlngs. lL ls helpful lf Lhese lnlLlaLlves are organlzed wlLhln Lhe documenLaLlon where Lhere ls a

31
summary by deparLmenL and Lhen more deLalled lnformaLlon under each dlvlslon or offlce. ln
addlLlon, Lhe agencles oughL Lo be requlred Lo make perlodlc reporLs on Lhe progress of
lnlLlaLlves belng underLaken and be held accounLable.

1he leglslaLure may also wanL Lo conslder a semlannual caseload, uLlllzaLlon, and
expendlLure esLlmaLlng conference Lo ensure noL only LhaL Lhe uPS ls meeLlng lLs LargeLs buL
also LhaL cosL overruns and supplemenLal budgeL requesLs are kepL Lo a mlnlmum.

1here are several dlsLlncL advanLages Lo Lhls recommendaLlon. llrsL, Lhe requlremenL
makes savlngs a speclflc focus, enhanclng Lhe need for Lhe execuLlve branch Lo puL forLh
proposals. Second, lL glves leglslaLors Lhe opporLunlLy Lo revlew savlngs lnlLlaLlves and also Lo
offer Lhelr own proposals. LeglslaLors need Lo see all Lhe lnlLlaLlves belng underLaken ln one
place. We know from experlence LhaL ralslng savlngs lnlLlaLlves Lo Lhls level wlll secure greaLer
efflclencles and dellver value Lo Lhe sLaLe.


32


6. ÞkCGkAM kLVILWS


1he 1ANI System

1emporary AsslsLance for needy lamllles (1Anl) ls a federally sponsored program
creaLed by Congress ln 1996 wlLh Lhe enacLmenL of Lhe Þersonal 8esponslblllLy and Work
CpporLunlLy 8econclllaLlon AcL (Þ8WC8A). lL replaced Ald Lo lamllles wlLh uependenL Chlldren
(AluC). 1o lmplemenL 1Anl ln Lhe sLaLe, Arkansas creaLed Lhe 1ranslLlonal AsslsLance (1LA)
program ln 1997.

1he 1996 welfare-reform law (Þ.L. 104-193) enLlLled sLaLes Lo a baslc 1Anl block granL
equal Lo peak expendlLures for pre-1Anl programs durlng ll? 1992 Lo 1993, when welfare rolls
were aL Lhelr all-Llme hlgh. Lach sLaLe's lndlvldual granL ln Lhe orlglnal 1Anl law ls based on Lhe
federal share of expendlLures ln Lhe pre-1996 Ald Lo lamllles wlLh uependenL Chlldren (AluC),
Lmergency AsslsLance, and !ob CpporLunlLles and 8aslc Skllls (!C8S) Lralnlng programs.

1o supplemenL lLs 1Anl block granL each flscal year, a sLaLe musL spend a speclfled
amounL of lLs own funds for beneflLs and servlces LhaL asslsL ellglble famllles ln ways LhaL are
conslsLenL wlLh one of Lhe four purposes of 1Anl program. 1he money LhaL a sLaLe ls requlred
Lo spend ouL of lLs own funds ls called MalnLenance of LfforL (MCL). 1he amounL of annual
sLaLe expendlLures on 1Anl-relaLed programs musL equal aL leasL 80 percenL of lLs spendlng on
AluC and relaLed programs ln 1994. 1hls percenLage ls reduced Lo 73 percenL lf Lhe sLaLe meeLs
Lhe federally mandaLed Work ÞarLlclpaLlon 8aLes (WÞ8) for Lwo caLegorles of reclplenLs: ºall
famllles" and ºLwo-parenL famllles."

SLaLes may use 1Anl funds for any beneflL or acLlvlLy relaLed Lo one of four sLaLuLory
purposes:
• Lo provlde asslsLance Lo needy famllles so LhaL Lhe chlldren may be cared for ln Lhelr
homes or ln Lhe homes of relaLlves,
• Lo end dependency of needy parenLs on governmenL beneflLs by promoLlng [ob
preparaLlon, work, and marrlage,
• Lo prevenL and reduce Lhe lncldence of ouL-of-wedlock pregnancles and esLabllsh annual
numerlcal goals for prevenLlng and reduclng Lhe lncldence of Lhese pregnancles,
• Lo encourage Lhe formaLlon and malnLenance of Lwo-parenL famllles

MCL expendlLures musL be for an allowable purpose, musL be made Lo or on behalf of
an ºellglble famlly," musL meeL Lhe ºnew spendlng LesL," and noL be oLherwlse excludable.
Allowable purposes for whlch sLaLe expendlLures may counL as MCL are cash asslsLance, chlld-
care asslsLance, educaLlonal acLlvlLles LhaL promoLe self-sufflclency, [ob Lralnlng, or work. 1hese

33
can be anyLhlng reasonably lnLended Lo fulflll a 1Anl purpose, and up Lo 13 percenL on relaLed
admlnlsLraLlve cosLs.


Arkansas 1ANI Cverv|ew

lundlng of Arkansas's 1Anl program breaks down as follows:
• Arkansas's 8aslc 1Anl 8lock CranL ls $36.7 mllllon annually. Arkansas's porLlon
represenLs 0.3 percenL of $16.4 bllllon allocaLed Lo Lhe flfLy sLaLes and Lhe ulsLrlcL of
Columbla.
• 80 percenL of Arkansas's requlred MCL ls $22.2 mllllon dollars or 73 percenL ls 20.8
mllllon provlded Lhe sLaLe meeLs federally mandaLed work parLlclpaLlon raLes.
• Arkansas was one of sevenLeen sLaLes LhaL recelved 1Anl SupplemenLal CranLs every
year. Powever, Arkansas losL $6.2 mllllon when Lhls faceL of 1Anl fundlng was omlLLed
from Lhe lebruary 22, 2012, 1Anl exLenslon slgned by ÞresldenL Cbama.

ln passlng Arkansas AcL 1703 of 2003, Arkansas made a number of courageous reforms
Lo lLs welfare sysLem by recognlzlng Lhe ueparLmenL of Workforce Servlces (uWS) as Lhe
admlnlsLerlng agency for Lhe program. ulfferenL from oLher sLaLe sLrucLures, Lhe ulvlslon of
CounLy CperaLlons wlLhln Lhe ueparLmenL of Puman Servlces ls a formal parLner wlLh uWS ln
Lhe operaLlon of 1Anl, called 1ranslLlonal LmploymenL AsslsLance (1LA) Þrogram. 1hls AcL
furLher esLabllshed Lhe Work Þays Þrogram as an lncenLlve Lo encourage worklng 1LA
parLlclpanLs Lo remaln employed afLer closure of Lhe 1LA case whlle lncreaslng Lhelr hours of
work and/or hourly wages. 1yplcally, Lhe human-servlces agency ls deslgnaLed as Lhe
admlnlsLraLlve enLlLy for 1Anl programs and enLers lnLo agreemenLs wlLh lLs respecLlve sLaLe
employmenL agency.

8eglnnlng !anuary 1, 2006, uWS assumed overall program responslblllLy for 1Anl
operaLlons and case managemenL, Lhe ulvlslon of CounLy CperaLlons held responslblllLy for
ellglblllLy deLermlnaLlons and cllenL paymenLs.

ln lnLervlewlng admlnlsLraLors from boLh agencles, Lhls ma[or resLrucLurlng has led Lo
well-deflned roles and responslblllLles for managers and workers allke and seemlngly slmpllfled
avenues of servlce dellvery for needy famllles seeklng asslsLance. ln addlLlon Lo lnLervlews, Lhe
Alexander Croup carrled ouL a general revlew of relevanL pollcles and processes, along wlLh an
examlnaLlon of mosL recenL sLaLe and naLlonal daLa reporLs. 1ogeLher, Lhls lnformaLlon
provlded a number of useful perspecLlves on Lhe effecLlveness of pollcles, expendlLures, and
ouLcomes ln Arkansas compared Lo oLher sLaLes. lL musL be emphaslzed LhaL Lhese revlews
were necessarlly prellmlnary as are Lhe ldeas and recommendaLlons belng made Lo Lhe
Arkansas leglslaLure.


34
Arkansas 1ANI I|nd|ngs
• lor a famlly of Lhree, Arkansas provldes a maxlmum paymenL level of $204 per monLh. 1hls
ls Lhe Lhlrd lowesL paymenL level ln Lhe counLry.
• 1LA Þrogram famllles have a 24-monLh llfeLlme llmlL on cash asslsLance. Work Þays famllles
may recelve up Lo 24 monLhs of addlLlonal paymenLs provlded Lhey meeL ellglblllLy
requlremenLs. 1hls work-lncenLlve program may be llmlLed Lo 3,000 famllles.
• As of Aprll 2013, 1LA caseload ls approxlmaLely 3,897 cases, wlLh approxlmaLely 12,932
reclplenLs. 1hls represenLs an 8-percenL decllne compared Lo Aprll 2012.
• As of Aprll 2013, Lhe CounLy reporLed approxlmaLely 1,014 Work Þays acLlve cases. 1hls
represenLs a 10-percenL decrease over Aprll 2012.
• 1he mosL recenL ACl 8eporL on 1Anl ÞarLlclpaLlon SLaLus for Arkansas (March 2011)
reflecLs LhaL acLual parLlclpaLlon of Work Lllglble famllles ln counLable work acLlvlLles ls
approxlmaLely 19.7 percenL. 1he same reporL reflecLs LhaL approxlmaLely 66.2 percenL have
zero counLable hours of parLlclpaLlon. naLlonally, 23.6 percenL are meeLlng Lhe federal
parLlclpaLlon-raLe sLandards and 32.3 percenL are ln zero hours of parLlclpaLlon.
• 1he sLaLe has meL Lhe requlred work-parLlclpaLlon raLe level aL 26 percenL. Arkansas, as
wlLh vlrLually all oLher sLaLes, achleves lLs federal work-parLlclpaLlon raLes for boLh
caLegorles of All lamllles and 1wo-ÞarenL lamllles ln parL due Lo Lhe Caseload 8educLlon
CredlL formula, whlch reduces Lhe acLual raLe ln accordance wlLh MCL-spendlng
calculaLlons.


1ANI I|sca| and Þrogram k|sks and kecommendat|ons

1he ueparLmenL of Workforce Servlces budgeL analysls of !uly 2012 clearly arLlculaLes
LhaL Arkansas faces slgnlflcanL flscal consLralnLs resulLlng from Lhe loss of subsLanLlal 1Anl
dollars on Lhe federal level comblned wlLh Lhe facL LhaL Lhe sLaLe has relled heavlly on lLs
prevlously robusL level of carryover funds whlch, LogeLher, have been used Lo supporL ma[or
lnlLlaLlves deflned ln Lhe sLaLe program. 1hese funds are runnlng low and cannoL be vlewed as
ongolng resources Lo supporL Lhe currenL comprehenslve servlce model.

Arkansas already has a Lremendous emphasls on provldlng supporL for worklng parenLs
and aLLempLlng Lo end dependence on welfare under Lhe currenL sysLem. Powever, wlLh Lhe
loss of 1Anl dollars on Lhe federal level and Lhe greaLly dlmlnlshed level of carry forward funds,
Lhere are some sLralghLforward reducLlons LhaL should be made wlLh Lhe followlng
conslderaLlons ln mlnd.

1he flrsL recommendaLlon ls an obvlous one, whlch ls Lo avold 1Anl penalLles aL all
cosLs. 1hls wlll requlre prlorlLlzlng only counLable work acLlvlLles. Accordlng Lo Lhe federal PPS
Cfflce of lamlly AsslsLance, 1Anl penalLles remaln a LhreaL ln Lhe fuLure for all sLaLes. Arkansas
ls noL slaLed for a penalLy aL Lhls Llme buL could lncur a penalLy as fundlng levels and programs
conLracL ln Lhe fuLure.


33
lalllng Lhe 1Anl work-parLlclpaLlon raLe ls only one of aL leasL fourLeen dlfferenL
penalLles LhaL can be lmposed lf a sLaLe falls Lo comply wlLh varlous requlremenLs. lf lmposed,
Lhese penalLles are cosLly, and can resulL ln a compoundlng loss of funds Lo a sLaLe. Whlle Lhere
may be correcLlve measures avallable Lo a sLaLe, Lhe process ls onerous and creaLes a
Lremendous level of uncerLalnLy whlle Lhe federal revlew and deLermlnaLlon ls made.

1he second recommendaLlon ls Lo LargeL exlsLlng programs funded wlLh 1Anl and MCL
dollars wlLh up Lo a 10-percenL cuL ln 2014 and 2013. Where pracLlcal, esLabllsh performance
based conLracLs/paymenLs wlLh hlgh performance lndlcaLors of acLlvlLles and ouLcomes, whlch
readlly conLrlbuLe Lo helplng Lhe sLaLe meeL lLs work-parLlclpaLlon raLes: 30 percenL for All
lamllles and 90 percenL for 1wo-ÞarenL lamllles.

1hlrd, Arkansas should reexamlne currenL pollcles on LxLended SupporL Servlces (LSS)
and reduce fundlng of cerLaln caLegorles of supporL LhaL are leasL lmpacLful on Lhe economlc
well-belng of famllles. 8ecause of Lhe rural naLure of Lhe sLaLe, LransporLaLlon asslsLance ls
essenLlal Lo faclllLaLlng Lhe parenL's parLlclpaLlon ln work and Lralnlng acLlvlLles. Powever, Lhere
may be opporLunlLles Lo reduce Lhe amounL of dollars commlLLed Lo Lhls and oLher LxLended
SupporL Servlces (LSS) ln a number of caLegorles, whlch-by comparlson Lo mosL oLher sLaLes-
are exLenslve and cosLly Lo Lhe Arkansas 1Anl program. 1haL ls, Lwelve monLhs of posL-cash
case-managemenL servlces, emergency paymenLs and relocaLlon expenses up Lo $2,000, vehlcle
down-paymenLs up Lo $2,300, and lf fundlng ls noL avallable, cuL back on Lhe LwenLy-four
monLh paymenLs for Work Þays households, Lo name a few.

lourLh, even Lhough Lhe federal governmenL does noL mandaLe Lhls, Lhe sLaLe should
begln Lracklng Lhe number of 1Anl reclplenLs LhaL are worklng a mlnlmum of LhlrLy hours a
week or more. AlLhough forLy hours remalns Lhe sLandard for a full-Llme [ob, Lhe LhlrLy-hour
number wlll allow admlnlsLraLor and Laxpayers Lo acLually Lrack real welfare-Lo-work
achlevemenL. A measure LhaL focuses more on acLual employmenL Lhan a myrlad of servlces
would help Lo resLore Lhe orlglnal focus of Lhe 1996 1Anl leglslaLlon.

Appendlx A also llsLs an lnlLlaLlve (#23) Lo expand and redeslgned employmenL ln Lhe
sLaLe. Subsldlzed employmenL placemenLs do lncrease [ob placemenLs. Lmployers wlll
parLlclpaLe ln well-run, slmpllfled sysLems of recrulLmenL, placemenL, and relmbursemenL.

Arkansas should conslder bulldlng a new model of collaboraLlon Lo operaLe subsldlzed
[obs for Lhe 1Anl caseload. Lmployers already reporL salary and wages earned by 1LA and
Work Þays famllles Lhrough uWS and are requlred Lo reporL corporaLe earnlngs Lhrough Lax
revenue funcLlons of Lhe ueparLmenL of llnance and AdmlnlsLraLlon. Meldlng LogeLher Lhese
reporLlng sysLems for 1Anl-subsldlzed workers faclllLaLes greaLer Lransparency and accuracy.

1hls model of operaLlng 1Anl subsldles also faclllLaLes program lnLegrlLy ln all levels of
Lhe sysLem, lncludlng llnklng employer reporLlng by maLchlng 1Anl placemenLs wlLh uWS
salary and wage reporLs wlLh lnformaLlon aL Lhe ueparLmenL of AdmlnlsLraLlon and llnance. A
slmllar deslgn was lmplemenLed ln Lhe SLaLe of 8hode lsland Lhrough 1Anl A88A fundlng ln

36
2010 and 2011. Lmployers, whlle lnlLlally skepLlcal, dld ln facL creaLe some [obs LhaL oLherwlse
dld noL exlsL, saw beneflLs Lo Lhelr boLLom llne, and were eager Lo parLlclpaLe ln slmllar
programs agaln. lor-proflL flrms were more llkely Lo reLaln workers afLer Lhe subsldy ended and
were more wllllng Lo parLlclpaLe ln programs wlLh only a parLlal subsldy. nonproflLs were more
moLlvaLed by asslsLlng parLlclpanLs and may be more wllllng Lo Lake on workers wlLh less
educaLlon and work experlence Lo help Lhem galn experlence. Lven Lhough Lhls represenLs a
new form of spendlng for Lhe sLaLe, lL ls reasonable Lo assume LhaL more [obs wlll be creaLed
for 1Anl reclplenLs LhaL would lmprove Lhe work-parLlclpaLlon raLe for 1Anl program and,
more lmporLanLly, wlll lead Lo long-Lerm [ob reLenLlon beyond Lhe perlod of Lhe subsldy.

Arkansas wlll face new fundlng challenges and vulnerablllLles ln 2014 and 2013, whlch
lnfluence Lhe Lypes of recommendaLlons belng offered. 8ecommendaLlons are based upon a
prellmlnary revlew of Lhe Arkansas 1Anl Þrogram, a revlew LhaL lncluded sLaLe- and federal-
level conLracLs and revlew of a broad range of sLaLe and naLlonal daLa reporLs. A closer scruLlny
ls unquesLlonably requlred ln order Lo help Lhe sLaLe make sound declslons Lo conLlnue Lo asslsL
famllles Lo achleve economlc lndependence. Arkansas has begun work Lo lmprove compuLer
sysLems and had deslgned a number of lmpresslve meLhods for sLreamllnlng essenLlal servlces.
8ulldlng upon Lhe 2006 resLrucLured admlnlsLraLlon and servlce-dellvery sysLem, Lhe sLaLe ls
unlquely polsed for even greaLer effecLlveness lf lL embarks upon a global redeslgn.


Ch||d-Care Þrogram

Accordlng Lo Lhe 2013 Arkansas Chlld Care uevelopmenL lund SLaLe Þlan (CCul), Lhe
ueparLmenL of Puman Servlces ls Lhe deslgnaLed lead agency Lo admlnlsLer Lhe CCul program.
1he lead agency esLlmaLes LhaL Lhe l? 2013 lederal CCul allocaLlon wlll be $49,331,087. 1hls
lncludes dlscreLlonary, mandaLory, and maLchlng funds. 1he LoLal amounL of sLaLe CCul
malnLenance-of-efforL funds ls approxlmaLely $1,886,341, Lhe sLaLe maLchlng funds are
expecLed Lo be $4,038,094. lederal regulaLlon sLaLes LhaL no more Lhan 3 percenL of Lhe
aggregaLed CCul funds, lncludlng Lhe requlred maLchlng funds, can be expended on
admlnlsLraLlon cosLs once all funds have been llquldaLed. SLaLe malnLenance-of-efforL funds are
noL sub[ecL Lo Lhls llmlLaLlon.

A revlew of Lhe ll? 2011 uaLa provlded by PPS AdmlnlsLraLlon for Chlldren and
lamllles, reporLed by Arkansas Chlld-Care Þrogram Lhrough lLs 801 reporL showed:
• Cn average, 3,600 famllles per monLh were served.
• Cn average, 9,000 chlldren per monLh were served,
• 100 percenL of Lhose served were pald Lhrough cerLlflcaLe program
• 88 percenL recelved cenLer-based chlld care
• 12 percenL were cared for ln regulaLed famlly-home seLLlngs
• 99 percenL of chlldren were ln llcensed/regulaLed seLLlngs
• 1 percenL were ln slLes LhaL were legally operaLlng wlLhouL regulaLlon
• Arkansas has 348 home-based provlders and 926 cenLer-based provlders

37
1he age breakdown of chlldren served showed Lhe followlng:
• 9 percenL-newborn - < 1 year
• 13 percenL-1 year Lo < 2 years
• 17 percenL-2 years Lo < 3 years
• 16 percenL-3 years Lo < 4 years
• 14 percenL-4 years Lo < 3 years
• 10 percenL-3 years Lo < 6 years
• 19 percenL-6 years Lo < 13 years

8easons for needlng care:
• 63 percenL due Lo employmenL
• 17 percenL due Lo Lralnlng/educaLlon
• 4 percenL due Lo boLh employmenL and Lralnlng/educaLlon
• 14 percenL due Lo proLecLlve servlces

Compared Lo Lhe prevlous year, Lhe average number of famllles served per monLh was
lower ln 2011 (3,600 famllles and 9,000 chlldren) Lhan reporLed ln 2010 (8,600 famllles and
14,100 chlldren). Also, Lhere were fewer chlld-care provlders reporLed ln 2011 (1,274) Lhan
reporLed ln 2010 (1,471 LoLal provlders). 1he sLaLe reflecLs LhaL 87 percenL of chlldren are
placed ln llcensed cenLer-based care. naLlonally, 80 percenL rely on cenLer-based care.

1he sLaLe has opLed Lo ºexclude" chlld-supporL lncome ln deLermlnlng ellglblllLy for
reclplenLs. lf counLed, such lncome would deLermlne LhaL some ellglble famllles mlghL be
requlred Lo make a copaymenL when Lhey are noL requlred Lo make a copaymenL now.
lurLhermore, some oLherwlse ellglble famllles mlghL even fall Lhe lncome LesL. ln effecL, over-
lncome appllcanLs would be denled chlld-care asslsLance and Lhus reduce number of famllles
accepLed lnLo Lhe chlld-care program. Powever, changlng Lhe pollcy Lo lnclude chlld-supporL
lncome when conslderlng ellglblllLy ln Lhe chlld-care program would very llkely lmprove overall
program lnLegrlLy. 1hls requlremenL bullds ln beLLer ellglblllLy conLrols and would glve greaLer
recognlLlon LhaL boLh parenLs are responslble for supporLlng Lhelr chlldren. CLher sLaLes have
adopLed Lhls pollcy wlLh a falr degree of lmprovemenL ln program lnLegrlLy resulLlng from such
a change.

uPS ls ln Lhe process of revlslng lLs copaymenL schedule for chlld-care servlces afLer
norLh Carollna's program. 1hls new model wlll requlre copaymenLs from everyone wlLh
lncomes above Lhe federal poverLy level, buL copaymenLs wlll be based on a percenLage of
famlly lncome.

1here ls slgnlflcanL opporLunlLy Lo lmprove program lnLegrlLy wlLh Lhe chlld-care
program. uPS relles on an elecLronlc-bllllng sysLem for aLLendance, conslsLenL wlLh how oLher
sLaLes admlnlsLer Lhe program buL also known for belng error prone. uPS ls conslderlng movlng
Lo a paperless sysLem. 1here ls no menLlon, however, of exacLly whaL Lhe new sysLem wlll
enLall. lndlana uLlllzes Lechnology whereby parenLs and guardlans musL swlpe a card whenever

38
a chlld ls dropped off or plcked up, whlch ls connecLed Lo Lhe paymenL sysLem. 1he lndlana
sysLem provldes a safeguard LhaL Lhe chlldren are acLually recelvlng Lhe servlce, whlch reduces
Lhe poLenLlal for fraud and abuse. lndeed, lndlana's enLlre beneflL-lnformaLlon sysLem ls so
good LhaL lnS ls looklng aL lL as a poLenLlal model for Lhe food-sLamps sysLem.

A sysLem slmllar Lo lndlana's wlll requlre sLarLup cosLs and a well-sLaffed admlnlsLraLlve
offlce for card replacemenLs, polnL-of-servlce (ÞCS) fallures, eLc. ÞCS devlces, however, are
relaLlvely lnexpenslve. We recommend LhaL Arkansas conducL a cosL-beneflL analysls and
conslder a sysLem slmllar Lo lndlana's.


Iood Stamps

ln Sl? 2012, Arkansas recelved $31,213,427 from Lhe federal governmenL for Lhe
admlnlsLraLlon of Lhe admlnlsLraLlon of Lhe SupplemenLal nuLrlLlonal AsslsLance Þrogram, or
SnAÞ, formerly called Lhe food sLamp program. Whlle SnAÞ beneflLs are pald 100 percenL by
federal uSuA, admlnlsLraLlve cosLs are prlmarlly based upon a 30/30 maLchlng requlremenL.
Powever, Lhe LoLal flgure provlded by lnS lncludes Lwo oLher programs LhaL are federally
funded aL 100 percenL: Lhe lood SLamp LmploymenL and 1ralnlng Þrogram and Lhe SnAÞ
nuLrlLlon LducaLlon Þrogram.

Congress reauLhorlzes SnAÞ approxlmaLely every flve years as parL of ºLhe farm blll."
uurlng Lhe reauLhorlzaLlon process, Congress can address a number of lssues, lncludlng Lhe
amounL of fundlng SnAÞ wlll recelve for Lhe nexL flve years. 1he currenL farm blll explred on
SepLember 30, 2012, buL was exLended unLll Lhe end of SepLember 2013 ln Lhe Amerlcan
1axpayer 8ellef AcL, whlch Congress passed on !anuary 1, 2013. Cn !anuary 22, 2013, Congress
agaln Look up debaLe on Lhe farm blll and as ls wldely known, Lhere has been focused debaLe ln
Congress as Lo Lhe fundlng and provlslons of Lhe farm blll. 1he Pouse farm blll falled passage on
!une 20, 2013, due Lo unresolved lssues relaLed Lo a slgnlflcanL number of proposed
amendmenLs. 1he recenL defeaL of Lhe blll means LhaL for now, Lhese amendmenLs wlll noL
become law. LasL year, Lhe farm blll was exLended Lhrough SepLember 2013, and lL wlll agaln
face explraLlon on CcLober 1, 2013, lf noLhlng else ls done. lor sLaLes, SnAÞ wlll conLlnue
unchanged unLll a new farm blll ls passed and enacLed lnLo law.

Accordlng Lo uPS CounLy Cfflce CperaLlonal 8eporL for Lhe monLh of Aprll 2013:
• 1oLal number of cases recelvlng SnAÞ 223,272
• 1oLal number of reclplenLs 300,397
• 1oLal amounL of dollars lssued ln beneflLs for monLh $60,601,308
• 1oLal number of appllcaLlons recelved ln Aprll 33,904
• 1oLal number approved appllcaLlons 24,044
• 1oLal number denled appllcaLlons 10,037
• 1oLal number of cases referred for fraud revlew 923
• 1oLal number of cases resulLed ln closure 382

39
• 1oLal number of cases found wlLh errors 329
• 1oLal amounL of dollars saved ln Aprll $311,773

A revlew of naLlonal SnAÞ daLa reporLs ln ll? 2011:
• 1oLal number of fraud lnvesLlgaLlons compleLed 9,738
• 1oLal amounL of fraud dollars deLermlned $3,938,809
• ln 2011, Lhe caseload lncreased +6.60°
• AdmlnlsLraLlve cosL/case per monLh ln 2011 $24.97
• SLaLe admlnlsLraLlve cosL was lower ln 2011 Lhan 2010 -3.92°
• l? 2011, average monLhly SnAÞ beneflLs were approxlmaLely $283.67 per household

Arkansas has done comparaLlvely well aL respondlng Lo poLenLlal fraud, wasLe, and/or
abuse relaLlve Lo SnAÞ. lor example, Lhe sLaLe ranks nlnLh hlghesL ln Lhe number of
lnvesLlgaLlons compleLed. 1he sLaLe ranks slxLh hlghesL ln LoLal fraud dollars deLermlned by
posL-cerLlflcaLlon lnvesLlgaLlons. Also, 80.38 percenL of Arkansas lalr Pearlngs are upheld.

ÞerspecLlves vary on Lhe SnAÞ program due Lo lLs conLlnulng growLh ln boLh
parLlclpaLlon levels and Lhe lncreaslng aLLendanL cosLs Lo Lhe federal governmenL. SupporLers
argue LhaL lL ls Lhe mosL effecLlve anLl-poverLy lnvesLmenL ever made ln Lhls counLry and LhaL
feedlng low-lncome famllles chlldren, unemployed and marglnally employed adulLs, people
wlLh dlsablllLles, homeless, and Lhe elderly are enLlrely worLhy of recelvlng Lhls cruclal beneflL.
CrlLlcs have concerns abouL Lhe runaway cosLs and Lhe hlgh poLenLlal for fraud and abuse.

Assurlng responslble admlnlsLraLlon of Lhls admlLLedly cosLly program Lo Amerlca's
Laxpayers ls lmperaLlve, whlch ls why uSuA and Congress have esLabllshed sLrldenL measures Lo
avold, deLecL, and acL aggresslvely Lo mlLlgaLe fraud, wasLe, and abuse ln Lhls program.

lf fundlng cuLs belng proposed ln Congress are passed, lL ls posslble LhaL Lhe farm blll of
2013 could see reducLlons of $20.3 bllllon and a cuL of aL leasL 2 mllllon reclplenLs from Lhe
program. AddlLlonally, a number of Lhe more sLrlngenL rules from Lhe pasL may flnd Lhelr way
back lnLo Lhe regulaLlons whlch wlll, ln effecL, conLracL Lhe slze of Lhe caseload over Llme.

Accordlng Lo uSuA, program lnLegrlLy efforLs of lnS and lLs sLaLe parLners are yleldlng
resulLs Lrendlng ln Lhe rlghL dlrecLlon. 1wo areas showlng excellenL measures relaLe Lo
cerLlflcaLlon errors, occurrlng when an ellglblllLy worker auLhorlzes beneflLs ln Lhe wrong
amounL, and Lrafflcklng, whlch occurs when SnAÞ beneflLs are Lraded for cash.

1he magnlLude of federal uSuA dollars comlng lnLo Lhe sLaLe ls slgnlflcanL. Powever, Lhe
breadLh of rules and regulaLlons LhaL govern Lhe use of Lhese dollars ls undersLandably very
complex, mulLl-layered, and, ln many slLuaLlons, hlghly error prone lf sLaLes are noL properly
admlnlsLerlng program servlces. ln SnAÞ, sLaLes are measured annually on a number of
benchmarks and may quallfy for elLher bonuses or penalLles, dependlng on Lhelr performance
ln Lhe followlng areas:

40
• 8esL ÞaymenL Accuracy based on ÞaymenL Lrror 8aLe
• MosL lmproved ÞaymenL Accuracy, based on decreased percenLage ln ÞaymenL Lrror
8aLe
• 8esL negaLlve Lrror 8aLe
• MosL lmproved negaLlve Lrror 8aLe
• 8esL Þrogram Access lndex
• MosL lmproved Þrogram Access lndex
• 8esL AppllcaLlon Þrocesslng 1lmellnes 8aLe

Arkansas was noL among Lhe sLaLes earnlng elLher a bonus or a penalLy ln lLs
performance measures for 2011. Powever on !une 28, 2012, lnS noLed LhaL even Lhough
Arkansas-along one oLher sLaLe (Mlssourl)-was noL assessed a flnanclal penalLy only because
Lhe error raLe was below 6 percenL. 1hey wenL on Lo sLaLe LhaL Lhese Lwo sLaLes were
consldered ln llablllLy sLaLus for Lhe 2011 year. SLaLes ln llablllLy sLaLus for Lwo consecuLlve
years can seL ln moLlon a penalLy lf Lhls performance measure remalns close Lo or above Lhe 6-
percenL error Lrlgger. Conslderlng Lhls exposure, lL ls recommended LhaL Lhe sLaLe lmprove on
paymenL accuracy sLandards and, aL Lhe same Llme, monlLor Lhe Llmellness of processlng
appllcaLlons and recerLlflcaLlons.

Arkansas's admlnlsLraLlve cosLs of SnAÞ leave room for lmprovemenL. Accordlng Lo
lnformaLlon provlded by uPS, Lhe LoLal admlnlsLraLlve cosL for SnAÞ ln Sl? 2012 was
$63,996,034. Cf Lhe amounL, $31,213,427 was sLaLe funds. Accordlng Lo lnS sLaLlsLlcal Lables
for 2011, LwenLy-seven sLaLes had lower admlnlsLraLlve cosLs per-case per monLh. Arkansas's
LoLal monLhly cosL Lo admlnlsLer Lhe program was $24.97 per household LhaL recelved SnAÞ
beneflLs. nearly half LhaL amounL ls pald for uslng sLaLe funds.

We recommend an ln-depLh analysls of all admlnlsLraLlve expendlLures, sLafflng levels,
and funcLlons Lo clarlfy LhaL whaLever expendlLures asslgns Lo sLaLe admlnlsLraLlve dollars are
essenLlal and conLrlbuLe Lo Lhe mandaLes of SnAÞ-beneflL lssuances. 1hls ls an opporLunlLy Lo
brlng down Lhe average admlnlsLraLlve cosL, savlng Lhe Laxpayer money.

llnally, Arkansas could peLlLlon lnS for enhanced admlnlsLraLlve dollars ln exchange for
lncreased program-lnLegrlLy efforLs. 1hls would yleld slgnlflcanL savlngs for boLh Lhe federal and
sLaLe governmenLs and reward Lhe sLaLe for Laklng lnlLlaLlve Lo enhance lLs fraud lnlLlaLlves.


41
Med|ca|d

Arkansas recelves Lhe ma[orlLy of Medlcald fundlng from Lhe federal governmenL. SLaLe
supporL lncludes general revenues, llcense fees, drug rebaLes, and Lhe Medlcald 1rusL lund. 1he
federal share however has fallen from 77 percenL ln 2004 Lo 70 percenL ln l? 2012. 1he mosL
recenL federal esLlmaLes pro[ecL LhaL Lhe lederal Medlcal AsslsLance ÞercenLage (lMAÞ) wlll fall
below 70 percenL Lhrough l?2013.
6


ln comparlson Lo Medlcald growLh, sLaLe revenue growLh ls pro[ecLed Lo lncrease
beLween 2-4 percenL per year accordlng Lo Lhe ueparLmenL of llnance and AdmlnlsLraLlon. As a
resulL, Arkansas Medlcald spendlng by lLself wlll accounL for almosL 30 cenLs of each addlLlonal
Lax dollar and 40 percenL of all funds. ConLlnulng Medlcald spendlng aL Lhe currenL level ls
crowdlng ouL all oLher leglslaLlve prlorlLles. WlLhouL a planned resLrucLurlng of currenL
Medlcald cosLs Lhere wlll be lncreaslng pressure Lo lmplemenL arblLrary across Lhe board cuLs ln
all programs. ln order Lo prevenL Lhese dlsrupLlve measures Lhe Alexander Croup would need
Lo look aL Lhe overall spendlng paLLerns and program conLrols for all Medlcald areas.

PosplLals, long-Lerm care for Lhe elderly, and servlces for lndlvlduals wlLh
developmenLal dlsablllLles accounL for more Lhan 60 percenL of all Arkansas Medlcald clalms.
8ecommendaLlons wlll place a hlgh prlorlLy on Lhese Lhree caLegorles of servlce. All Lhree
caLegorles conLlnue Lo rely on cosL-based relmbursemenLs. Cnly flve oLher sLaLes use Lhls
meLhodology Lo relmburse lnpaLlenL hosplLal servlces. 1hls reporL wlll address more effecLlve
paymenLs LhaL promoLe Lhe efflclenL dellvery of care.

Changes ln Arkansas Medlcald pollcy and uLlllzaLlon paLLerns have resulLed ln several
new cosL drlvers LhaL requlre paymenL reform and/or program-lnLegrlLy lnlLlaLlves. 1hese
lnclude non-emergency LransporLaLlon, hosplce servlces, and durable medlcal equlpmenL. lor
Lhese caLegorles we are proposlng savlngs lnlLlaLlves LhaL wlll asslsL uPS ln lowerlng year-Lo-
year per-person lncreases Lo below 4 percenL.

Cf Lhe LhlrLy-Lwo lnlLlaLlves llsLed ln Appendlces A and 8, nlneLeen are speclflc Lo
Medlcald. AddlLlonally, nlne oLhers lmpacL mulLlple programs, lncludlng Medlcald. Also, Lhls
reporL's recommendaLlon for a global walver ls also speclflc Lo Medlcald, and Lhe
recommendaLlon for comprehenslve welfare reform obvlously would lnclude Medlcald.


Þrogram Integr|ty, Mon|tor|ng, and Cvers|ght

Several offlces have responslblllLy for program lnLegrlLy, monlLorlng, and overslghL. 1he
Cfflce of CuallLy Assurance (CCA) wlLhln uPS conslsLs of Lhree secLlons: AudlL, CuallLy

6. ºlederal lunds lnformaLlon for Lhe SLaLes," a pro[ecL of Lhe naLlonal Covernors AssoclaLlon and Lhe
naLlonal Conference of SLaLe LeglslaLures.

42
Assurance AnalysLs, and lraud lnvesLlgaLlons, whlch lnclude Lhe lnLernal Affalrs unlL. ln
addlLlon, Lhe followlng program-lnLegrlLy subdlvlslons exlsL: CuallLy Assurance, CerLlflcaLlon,
and Llcensure (uMS), Long-1erm Care Medlcald Walver CuallLy Assurance, Þrogram Þlannlng &
uevelopmenL (uMS), Chlld Welfare CuallLy Assurance (uClS), speclal lnvesLlgaLlons (uCC), and
Medlcald LllglblllLy CuallLy ConLrol (MLCC) 1113 Walver ÞlloL (uCC).

1he uPS operaLes a Þrogram-lnLegrlLy unlL (Þlu) Lo comply wlLh CMS Medlcald lnLegrlLy
program. 1he responslblllLles, accordlng Lo CMS, are Lo hlre conLracLors Lo revlew Medlcald
provlder acLlvlLles and audlL clalms, ldenLlfy overpaymenLs, and educaLe provlders and oLhers
on Medlcald program lnLegrlLy lssues, and Lo provlde effecLlve supporL and asslsLance Lo sLaLes
ln Lhelr efforLs Lo combaL Medlcald provlder fraud, wasLe, and abuse. lederal regulaLlons
requlre LhaL a sLaLe's Medlcald agency have a meLhod Lo verlfy wheLher servlces relmbursed by
Medlcald were acLually furnlshed Lo beneflclarles.

1he Þlu has a few resLrlcLlons LhaL lnhlblL lLs effecLlveness. 1here are lnsLances of
program-lnLegrlLy reporLs noL belng lssued. lndependence and effecLlveness ls ln quesLlon due
Lo Lhe reporLlng sLrucLure Lo program and provlder managemenL raLher Lhan Lhe uMS or uPS
dlrecLor. ManagemenL prevenLed Lhe lssuance of several reporLs prepared by Lhe Þlu regardlng
home- and communlLy-based servlce provlders LhaL lncluded lmproper paymenLs. 8esulLs of
Lhe Þlu's provlder fleld revlews are noL exLrapolaLed Lo Lhe sample populaLlon Lo deLermlne
provlder overpaymenLs sub[ecL Lo recoupmenL.

1he Medlcald lalrness AcL lnhlblLs Lhe Þlu recoupmenLs unLll lL can esLabllsh a ºpaLLern
of wasLe, fraud, and abuse." 1he acL may prevenL Lhe sLaLe from recoverlng overpaymenLs Lo
provlders, buL lL does noL prevenL Lhe federal governmenL from recoverlng Lhe federal share of
overpaymenLs from Lhe sLaLe. 1he sLaLe ls placed aL a dlsadvanLage because lL musL reLurn
federal funds, alLhough lL may have no way Lo recover Lhe funds from a provlder. 1he Medlcald
lalrness AcL of 2003 ls lnLended Lo ensure LhaL uPS and lLs ouLslde conLracLors LreaL provlders
falrly and follow due process. Speclflcally, uPS cannoL use a Lechnlcal deflclency as grounds for
recoupmenL unless ldenLlfylng Lhe deflclency as an overpaymenL ls mandaLed by a speclflc
federal sLaLuLe or regulaLlon or Lhe sLaLe ls requlred Lo repay Lhe funds Lo CMS. 1herefore, Lhe
Þlu can recoup overpaymenLs based only on cases lL has revlewed.

8eclplenL ellglblllLy deLermlnaLlons are open Lo revlew by uCC supervlsors and uPS
deparLmenLs. 1he Medlcald LllglblllLy CuallLy ConLrol (MLCC) unlL, Lhe ÞL8M unlL, Lhe fraud
unlL, as well as Lhe Þul are uLlllzed for Lhe revlews. Many of Lhese deparLmenLs are federally
mandaLed and developed Lo safeguard agalnsL fraud, wasLe, and abuse and Lo esLabllsh Lhe
pollcles LhaL govern Medlcald. 1hrough a CMS walver, Lhe MLCC unlL only revlews long-Lerm
care Medlcald cases for ellglblllLy. uMS also conLracLs wlLh a flscal agenL LhaL performs provlder
background searches uLlllzlng Lexlsnexls and Lhe Cfflce of lnspecLor Ceneral (ClC) webslLe Lo
ensure LhaL sancLlons or negaLlve acLlons are noL assoclaLed wlLh a provlder. AddlLlonally,
Lhrough a correcLlve acLlon plan, all cases wlLh pald clalms LoLallng more Lhan $30,000 per year
would be revlewed by Lhe uCC CuallLy Assurance unlL Lo ensure reclplenL ellglblllLy.


43
1he Medlcald servlces manual provldes crlLerla for ensurlng appllcanLs meeL ellglblllLy
requlremenLs, buL Medlcald assoclaLed wlLh cash programs are referred Lo Lhe cash manuals.
1he cash manuals are consldered reference manuals raLher Lhan ellglblllLy manuals for
Medlcald creaLlng a gap ln malnLalnlng Lhe lnLegrlLy of Lhe program. Medlcald beneflclarles are
Lo lnform uCC of any changes lmmedlaLely regardlng Lhelr household composlLlon, lncome,
resources, or oLher crlLerla LhaL may affecL ellglblllLy. uCC counLy offlces ofLen lack sufflclenL
adequaLe Lralned sLaff, resulLlng ln heavy caseloads and error ln Medlcald reclplenL ellglblllLy.

LnrollmenL crlLerla for each provlder Lype are based on federal and sLaLe laws and
regulaLlons ouLllned ln Lhe Medlcald provlder manuals. Þrovlders are Lo noLlfy Lhe Medlcald
provlder enrollmenL unlL of any change Lo lLs appllcaLlon or conLracL, lncludlng convlcLlon of
crlme. 1he uPS parLlclpanL excluslon rule provldes Lhe parameLers ln whlch a parLlclpanL wlll be
excluded from parLlclpaLlon ln uPS programs Lo proLecL publlc funds. Speclflc PC8S provlders
are requlred Lo malnLaln documenLaLlon supporLlng servlces rendered, buL conLrols are lacklng.

1he uPS has esLabllshed organlzaLlonal unlLs and buslness processes Lo address
program lnLegrlLy, monlLorlng, and overslghL. Many of Lhe processes have been effecLlve,
however, Lhere are many opporLunlLles for lmprovemenL. ln Lhe mosL recenL sesslon of Lhe
Ceneral Assembly, Lhe leglslaLure creaLed an lndependenL Medlcald Cfflce of lnspecLor Ceneral
LhaL wlll slgnlflcanLly lmprove accounLablllLy and overslghL. Lven wlLh LhaL, conLlnued
lmprovemenL ln program lnLegrlLy, monlLorlng, and overslghL would help meeL federal and
sLaLe requlremenLs, earn Lhe LrusL of Lhe Laxpayers, safeguard agalnsL fraud, wasLe, and abuse,
and proLecL publlc funds.


44


7. Cost-Sav|ng In|t|at|ves Summary

ln fulflllmenL of Lhe Lerms of Lhe conLracL and Lo dellver Lo Arkansas Laxpayers Lhe
maxlmum reLurn on lnvesLmenL (8Cl), Lhe Alexander Croup has ldenLlfled LhlrLy-Lwo lnlLlaLlves
LhaL wlll lmprove admlnlsLraLlon and ouLcomes of welfare programs. 1hlrLy of Lhese lnlLlaLlves,
ouLllned ln Appendlx A, can be adopLed falrly easlly and wlll provlde shorL-Lerm savlngs and cosL
avoldance.







As Lhe Lable lndlcaLes, Lhese lnlLlaLlves wlll lncrease program performance and save
Arkansas beLween $63,192,000 and $98,166,000 ln sLaLe funds. More Lhan half of Lhese
lnlLlaLlves are excluslve Lo Medlcald, buL Lhe oLhers lmpacL 1Anl, chlld care, and SnAÞ.

ln addlLlon Lo Lhe shorL-Lerm lnlLlaLlves, Lhe Alexander Croup ls recommendlng Lwo
ma[or lnlLlaLlves. 1he flrsL ls Lhe ÞrlvaLe MarkeL PealLh-Care 1ranslLlon lnlLlaLlve (#31), deLalled
ln Appendlx 8. 1hls lnlLlaLlve wlll provlde greaLer savlngs of $300 mllllon Lo $400 mllllon, of
whlch $13 mllllon Lo $20 mllllon would be ln sLaLe funds. 1he ÞrlvaLe MarkeL PealLh-Care
1ranslLlon lnlLlaLlve redeslgns and slmpllfles beneflL packages wlLh Lhe flexlblllLy Lo offer baslc
beneflL packages LhaL allgn wlLh Lhe core needs of reclplenLs wlLh addlLlonal opLlons Lhrough a
cosL-sharlng componenL wlll meeL Lhe needs ln a susLalnable manner. 1he flexlblllLy Lo enroll
Medlcald reclplenLs ln free-markeL healLh-care plans enables Arkansas Lo promoLe personal
responslblllLy and lndependence. 1hls reform wlll need federal approval.

1he second ma[or lnlLlaLlve (#32) calls for Lhe creaLlon of a LransparenL healLh-care
program/plan for sLaLe and publlc-school employees. lL connecLs Lhe payer Lo provlders and
deploys paymenLs for approprlaLe level of care. 1hls lnlLlaLlve wlll save an esLlmaLed
$36,183,000 Lo $48,936,000, of whlch $31,843,000 Lo $43,081,000 ls esLlmaLed Lo be sLaLe
funds. 1he Lable below summarlzes Lhe savlngs from Lhese Lwo lnlLlaLlves.

Savings from Two Major Initiatives

Low Estimate High Estimate
State Funds ($46,843,000) ($63,081,000)
Federal Funds ($289,342,000) ($385,875,000)
Total Funds ($336,185,000) ($448,956,000)

Savings from Short-Term Initiatives
Low Estimate High Estimate
State Funds ($65,192,000) ($98,166,000)
Federal
Funds ($143,948,000) ($218,554,000)
Total Funds ($209,140,000) ($316,720,000)

43
1he comblned savlngs from all LhlrLy-Lwo lnlLlaLlves are esLlmaLed Lo be beLween $343
mllllon Lo $766 mllllon ln LoLal funds, or $112 mllllon Lo $161 mllllon ln sLaLe funds.

Savings for All Initiatives
Low Estimate High Estimate
State Funds ($112,035,000) ($161,247,000)
Federal Funds ($433,290,000) ($604,429,000)
Total Funds ($545,325,000) ($765,676,000)

1he Lable below llsLs each lnlLlaLlve along wlLh Lhe esLlmaLed savlngs for Lhe SLaLe of
Arkansas and Lhe federal governmenL.



Low High Low High Low High
Contract Consolidation ($4,500,000) ($6,000,000) ($10,500,000) ($14,000,000) ($15,000,000) ($20,000,000)
Hospital Readmissions NA NA NA NA NA NA
High Cost Case Review ($711,000) ($1,185,000) ($1,659,000) ($2,765,000) ($2,370,000) ($3,950,000)
Optimizing third party Liability (TPL) ($1,500,000) ($2,100,000) ($3,500,000) ($4,900,000) ($5,000,000) ($7,000,000)
Self Reported Services ($600,000) ($900,000) ($1,400,000) ($2,100,000) ($2,000,000) ($3,000,000)
Hospice Cost Reduction ($300,000) ($600,000) ($700,000) ($1,400,000) ($1,000,000) ($2,000,000)
Restructure Programs f or Persons with DD ($1,500,000) ($2,700,000) ($3,500,000) ($6,300,000) ($5,000,000) ($9,000,000)
Home & Community Based Services Promotion ($12,000,000) ($15,000,000) ($28,000,000) ($35,000,000) ($40,000,000) ($50,000,000)
Home & Community Based Services DAAS ($1,500,000) ($2,100,000) ($3,500,000) ($4,900,000) ($5,000,000) ($7,000,000)
Inpatient Acute Care Rate Restructuring ($1,800,000) ($3,000,000) ($4,200,000) ($7,000,000) ($6,000,000) ($10,000,000)
Emergency Department Visits ($390,000) ($540,000) ($910,000) ($1,260,000) ($1,300,000) ($1,800,000)
Pre-Payment Medicaid Claim Verif ication ($1,212,000) ($1,638,000) ($2,828,000) ($3,822,000) ($4,040,000) ($5,460,000)
Annual & Semi-Annual Case Reviews ($15,000,000) ($24,000,000) ($35,000,000) ($56,000,000) ($50,000,000) ($80,000,000)
OMV Access f or Front End Detection Unit ($540,000) ($720,000) ($1,260,000) ($1,680,000) ($1,800,000) ($2,400,000)
Non-Citizen Benef iciaries ($255,000) ($345,000) ($595,000) ($805,000) ($850,000) ($1,150,000)
Selective Contracting - Durable Medical Equipment ($600,000) ($810,000) ($1,400,000) ($1,890,000) ($2,000,000) ($2,700,000)
Data Exchange ($4,500,000) ($7,500,000) ($10,500,000) ($17,500,000) ($15,000,000) ($25,000,000)
Edits/Audits/Alerts ($5,400,000) ($9,000,000) ($12,600,000) ($21,000,000) ($18,000,000) ($30,000,000)
Out-of -State Benef it Usage ($54,000) ($108,000) ($126,000) ($252,000) ($180,000) ($360,000)
Deceased Persons Eligibility Data Match ($375,000) ($600,000) ($875,000) ($1,400,000) ($1,250,000) ($2,000,000)
Modif y Medicare Buy-In Auto-Accrete Process ($600,000) ($1,275,000) ($1,400,000) ($2,975,000) ($2,000,000) ($4,250,000)
SSI Suspensions ($255,000) ($345,000) ($595,000) ($805,000) ($850,000) ($1,150,000)
Expand/Redesign Subsidized Employment NA NA NA NA NA NA
Revamp TANF Budget Priorities NA NA NA NA NA NA
Expanded Recovery—Estate Liens ($1,500,000) ($2,100,000) ($3,500,000) ($4,900,000) ($5,000,000) ($7,000,000)
Children’s Health Account Enhancements ($900,000) ($1,500,000) ($2,100,000) ($3,500,000) ($3,000,000) ($5,000,000)
Enhanced Pref erred Drug List – MH Medications ($900,000) ($2,100,000) ($2,100,000) ($4,900,000) ($3,000,000) ($7,000,000)
Childcare Program Integrity NA NA NA NA NA NA
Behavioral Health System Payment Ref orm ($4,800,000) ($7,500,000) ($11,200,000) ($17,500,000) ($16,000,000) ($25,000,000)
Medicaid f or Prisoners ($3,500,000) ($4,500,000) $0 $0 ($3,500,000) ($4,500,000)
TOTAL SHORT TERM INITIATIVES ($65,192,000) ($98,166,000) ($143,948,000) ($218,554,000) ($209,140,000) ($316,720,000)
Private Market Health Care Transition ($15,000,000) ($20,000,000) ($285,000,000) ($380,000,000) ($300,000,000) ($400,000,000)
Self -Insured Employee Health Plan ($31,843,000) ($43,081,000) ($4,342,000) ($5,875,000) ($36,185,000) ($48,956,000)
TOTAL MAJOR INITIATIVES ($46,843,000) ($63,081,000) ($289,342,000) ($385,875,000) ($336,185,000) ($448,956,000)
TOTAL ALL INITIATIVES ($112,035,000) ($161,247,000) ($433,290,000) ($604,429,000) ($545,325,000) ($765,676,000)
Name
State Funds Federal Funds Total

46
Add|t|ona| kecommendat|ons

1hroughouL Lhls reporL, we have made recommendaLlons ln addlLlon Lo Lhe lnlLlaLlves ln
Appendlces A and 8. 1he followlng ls a summary of Lhese recommendaLlons.
1. We sLrongly recommend LhaL Arkansas adopL a sysLem of deLalled meLrlcs LhaL wlll
serve programmaLlc needs and pollcy-level analysls. Several of Lhese meLrlcs can
become performance-based measuremenLs Lo be used ln concerL wlLh performance-
based budgeLlng. As parL of Lhe sysLem, uPS and uWS wlll provlde monLhly daLa Lo Lhe
Ceneral Assembly LhaL shall lnclude, buL noL be llmlLed Lo, acLual caseloads and
expendlLures by caLegory for Lhe followlng programs: Medlcald, 1Anl, SSl program,
chlld care, and SnAÞ.
2. 1he Arkansas Ceneral Assembly should conslder adopLlng leglslaLlon Lo requlre
execuLlve agencles Lo lnclude all cosL-savlng lnlLlaLlves as parL of Lhelr budgeL proposals.
1hls wlll greaLly enhance Lhe ablllLy of Lhe Ceneral Assembly Lo monlLor and conLrol
cosLs. ln addlLlon, Lhe Ceneral Assembly should esLabllsh a blannual (Lwlce a year)
caseload, uLlllzaLlon, and expendlLure-esLlmaLlng conference beLween Lhe deparLmenL
and Lhe leglslaLure Lo hold agency heads accounLable and ensure LhaL supplemenLal
requesLs are kepL Lo a mlnlmum.
3. 1here ls room Lo flnd greaLer efflclencles ln Lhe SnAÞ Þrogram. lurLher analysls ls
needed Lo deLermlne speclflc ways Lo lmprove Lhe admlnlsLraLlon of Lhe SnAÞ program.
8ecause sLaLe funds are used Lo fund nearly flfLy percenL of Lhe admlnlsLraLlve cosLs,
Arkansas would beneflL flnanclally from Lhe cosL savlngs.
4. 1he chlld-care asslsLance program also presenLs a good opporLunlLy for lmprovemenL.
We recommend furLher research and cosL-beneflL analysls of lnsLlLuLlng as sysLem
slmllar Lo lndlana's sysLem.
3. Arkansas should engage a quallfled professlonal consulLlng flrm wlLh speclflc experLlse
ln deslgnlng and managlng global walvers Lo develop a redeslgn proposal on Medlcald
and oLher publlc-welfare programs. 1hls would sLreamllne lLs walvers and sLaLe-plan
amendmenLs and ensure LhaL all programs share Lhe same goals, ob[ecLlves, and
regulaLory sLrucLure (Lo be submlLLed Lo Lhe federal governmenL). A global redeslgn and
walver wlll dramaLlcally lmprove efflclencles and ouLcomes, reduce Lhe welfare burden
on Lhe sLaLe and save slgnlflcanLly more money Lhan Lhe lnlLlaLlves deLalled ln
Appendlces A and 8. 1hls comprehenslve redeslgn proposal would lnclude a sLraLegy Lo
galn approvals from Lhe federal governmenL.
6. Arkansas should conslder engaglng a quallfled professlonal consulLlng flrm wlLh speclflc
experLlse ln deslgnlng and managlng an enLerprlse-wlde program-lnLegrlLy plan Lo
develop such an lnlLlaLlve for Arkansas LhaL would work ln Landem wlLh, and provlde
overslghL over, Lhe global redeslgn (walver). 1hls lnlLlaLlve would lnclude all publlc-
welfare programs and address Lhe negaLlve economlc lncenLlves lmbedded ln Lhe
welfare sysLem.


47


Append|x A: 8ASIC INI1IA1IVLS


Lach lnlLlaLlve lncludes an lnformed range for Lhe annual esLlmaLed savlngs LhaL may be
phased ln over Lhe nexL Lwo years and ls conslsLenL wlLh federal and sLaLe law. Þroposals may
lnclude appllcaLlon for federal walver where lL ls reasonable Lo expecL approval. Þroposals
lnclude Lhe lmpacLs on provlders, consumers, and sLaLe agencles. 1he assumpLlons and savlngs
meLhodology are supporLed by daLa from Arkansas and/or oLher sLaLe agencles. 1he flnal
annual savlngs are esLlmaLed ln a range, Lyplcally a varlance of 13 percenL LhaL allows for boLh
Lhe overlap among programs and Lhe complexlLy of federal and sLaLe program rules. Where
appllcable, Lhe assumed lMAÞ raLe assumed ls 70 percenL, rounded from Lhe currenL lMAÞ
raLe of 70.17 percenL. Arkansas's lMAÞ has been falllng over Lhe lasL Len years and Lhe lederal
lunds lnformaLlon for Lhe SLaLes predlcLs lL wlll conLlnue Lo fall for Arkansas.


48
1. Contract Conso||dat|on
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($4,300,000) Lo ($6,000,000)
lederal lunds ($10,300,000) Lo ($14,000,000)
1oLal lunds ($13,000,000) Lo ($20,000,000)

Descr|pt|on
1he ueparLmenL of Puman Servlces (uPS) and Lhe ueparLmenL of PealLh (uCP) wlll supporL slxLy-nlne
conLracLs ln 2013 valued aL $181,108,771. uPS supporLs forLy-Lwo of Lhe conLracLs for $93,248,892,
uCP supporLs LwenLy-seven conLracLs for $87,839,879. 1here are conLracLs LhaL provlde slmllar servlces,
such as beneflclary assessmenLs, or Lhe same servlces ln dlfferenL geographlcal areas. ln addlLlon, Lhere
are conLracLs LhaL provlde slmllar servlces already performed by oLher sLaLe employees or dlvlslons.

Þroposa|
ConsolldaLlng slmllar conLracLs can reduce cosLs by Len percenL. A revlew of each of Lhe conLracLs and
Lhe conLracL provlslons wlll be requlred. ShorL and long Lerm sLraLegles wlll need Lo be esLabllshed due
Lo varylng conLracL cycles.
• 8evlew each of Lhe conLracLs dellverlng slmllar servlces.
• 8evlew conLracL dellverables Lo ensure Lhey are meeLlng Lhe needs of Lhe programs.
• ueLermlne Lhe ablllLy Lo modlfy Lhe conLracL provlslons.
• ConsolldaLe conLracLs LhaL can be compleLed wlLhouL a conLracL renewal.
• LsLabllsh a conLracL schedule for consolldaLlons LhaL requlre renewal or a new 8lÞ.

Interagency Impact: uPS and uCP wlll need Lo cooperaLe ln Lhe lnlLlaLlve.
Þrov|der]Commun|ty Impact: ConLracLors wlll llkely reslsL consolldaLlon and fundlng reducLlons.
Iedera| Change Impact: none.
1|metab|e: Þrocess can begln !anuary 2014.


49
2. nosp|ta| keadm|ss|ons
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds nA
lederal lunds nA
1oLal lunds nA
Descr|pt|on
lnpaLlenL readmlsslons aL medlcal faclllLles are very cosLly Lo Lhe enLlre medlcal provlder neLwork,
lnsurance provlders and governmenL enLlLles provldlng healLh-care beneflLs. 1he ulvlslon of Medlcal
Servlces (uMS) and lLs conLracLed vendors-Lhe Arkansas loundaLlon for Medlcal Care (AlMC), Lhe
PealLh Servlces Advlsory Croup (PSAC), and PewleLL Þackard (PÞ)-were unable Lo provlde currenL
lnformaLlon nor hlsLorlcal daLa on Lhe number on hosplLal readmlsslons and Lhe assoclaLed cosLs ln a
Llmely manner. AlMC, PSAC, and PÞ have exlsLlng conLracLs LoLallng more Lhan $40 mllllon annually Lo
perform daLa mlnlng and program evaluaLlon servlces. Whlle lL may be undersLandable LhaL currenL daLa
mlghL be unavallable, uMS should aL leasL be able Lo generaLe hlsLorlcal daLa.

1he ÞaLlenL ÞroLecLlon and Affordable Care AcL (ACA) lncluded a provlslon almed aL lowerlng hosplLal
lnpaLlenL readmlsslons. Medlcare has begun assesslng penalLles agalnsL hosplLals wlLh excesslve raLes
compared Lo basellnes daLa. 1he mosL recenL reporL (March 2013) lncludes 43 Arkansas hosplLals, many
recelvlng Lhe maxlmum penalLy based on eplsodes such as cardlovascular dlsease. 1he unlLed PealLh
loundaLlon 2011 Amerlcas PealLh 8anklngs places Arkansas 46
Lh
ln Lhe LreaLmenL of hearL dlsease and
43
rd
ln prevenLable hosplLallzaLlons.

1hese same healLh ranklngs lndlcaLe LhaL Medlcald and oLher lmpoverlshed paLlenLs are more llkely Lo
end up reLurnlng wlLhln 30 days of hosplLal dlscharge. 1he Covernor ls relylng on hls ÞaymenL
lmprovemenL lnlLlaLlve Lo lower hosplLal readmlsslons for Lhese lndlvlduals by rewardlng hlgh
performlng physlclans Lhrough a reLrospecLlve revlew. lor Lhese reasons lL ls recommended LhaL
Arkansas esLabllsh a monLhly Lracklng and evaluaLlon process for hosplLal readmlsslons.

Þroposa|
uMS needs Lo develop sLandard benchmarklng meLrlcs and revlew currenL conLracLs for daLa mlnlng and
program evaluaLlon servlces Lo ensure LhaL sLaLe and federal funds are expended ln manner LhaL
provldes daLa ln a Llmely manner. 1hls lnformaLlon ls vlLal Lo leglslaLors and oLher leaders ln declslon-
maklng capaclLles. As a resulL of Lhls, we were unable Lo esLlmaLe cosL savlngs.

uMS should develop pollcles Lo requlre conLracLors and oLhers charged wlLh program monlLorlng Lo
revlew lnpaLlenL hosplLal dlscharges from Lhe same faclllLy wlLhln a LhlrLy-day wlndow Lo deLermlne lf
Lhese admlsslons are relaLed. Changes Lo Lhe relmbursemenL pollcy would be lmplemenLed Lo prevenL
or dlscourage abuses. 1hls would allgn Lhe Medlcal AsslsLance pollcy wlLh healLh-care lndusLry
sLandards, lncludlng Medlcare. SysLem changes would be requlred Lo prevenL clalms from belng
processed when readmlsslons occur wlLhln 30 days.

ln addlLlon, uMS needs Lo develop sLandard benchmarklng meLrlcs and revlew lLs conLracLs for daLa-
mlnlng and program evaluaLlon servlces.

Interagency Impact: none

30
Þrov|der]Commun|ty Impact: 8elmbursemenL pollcy would change for readmlsslons wlLhln 30 days of an
lnlLlal admlsslon
Iedera| Change Impact: none
1|metab|e: !uly 2014

31
3. n|gh-Cost Case kev|ew
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($711,000) Lo ($1,183,000)
lederal lunds ($1,639,000) Lo ($2,763,000)
1oLal lunds ($2,370,000) Lo ($3,930,000)

Descr|pt|on
8ased upon ueparLmenL of Puman Servlces daLa, Lhe Medlcald program pald $79,040,033 ln Sl? 2011-12
on behalf of [usL 100 lndlvlduals for servlces wlLh an average annual cosL of $790,400. 1wenLy of Lhe Lop 100
cases cosL well ln excess of $1 mllllon. Whlle uPS ls able Lo ldenLlfy Lop beneflclarles, Lhere ls currenLly no
process ln place Lo deLermlne lf servlces rendered are effecLlve ln Lhe currenL dellvery sysLem. uMS and
Lhelr conLracLed vendors are noL currenLly produclng benchmarks ln a Llmely manner ln order Lo ldenLlfy
areas ln whlch quallLy-of-care Lo beneflclarles could be lmproved or where cosLs could be decreased as a
resulLed of decreased emergency room vlslLaLlon, hosplLal admlsslon, and re-admlsslons.

Þroposa|
1hls lnlLlaLlve proposes Lo lnLenslvely manage hlgh cosL cases Lhrough an lnLer-dlvlslonal uPS workgroup
prlmarlly focused on lnpaLlenL uLlllzaLlon. Savlngs wlll be generaLed Lhrough decreased emergency-room
uLlllzaLlon, hosplLal admlsslons and re-admlsslons, and an lncrease ln on-golng care managemenL. lf Lhe
Plgh-CosL Case 8evlew Leam flnds LhaL an lndlvldual has uLlllzed Medlcald servlces aL a frequency or amounL
LhaL ls noL medlcally necessary, ln accordance wlLh uLlllzaLlon guldellnes, uPS may resLrlcL LhaL lndlvldual
from obLalnlng Medlcald servlces from oLher Lhan deslgnaLed provlders excepL emergency medlcal servlces.
Powever, uPS wlll ensure Lhe reclplenL has reasonable access Lo Medlcald servlces of adequaLe quallLy. An
lnLradeparLmenLal Leam wlll develop and lmplemenL sLraLegles Lo ldenLlfy ºupsLream" and ºdownsLream"
approaches deslgned Lo LargeL and case-manage hlgh cosL lndlvlduals prlorlLlzlng Lhe hlgh and lmmedlaLe
reLurn on lnvesLmenL (8Cl). CosL savlngs assume Lrlmmlng cosLs by 3 percenL Lo 3 percenL.

1he 1eam should develop Lhe followlng approach:
• ldenLlfy Lop 100 reclplenLs by clalms daLa for l? 2012 and 2013.
• uevelop process and goals for Plgh-CosL Case 8evlew Leam.
• CreaLe work plan, deflne ouLcome measures, reporLlng and monlLorlng goals, ldenLlfy daLa and
analyLlcal needs, and maxlmlze care managemenL.
• 8evlew currenL llLeraLure and oLher sLaLe programs (WashlngLon SLaLe Model) and ºPoL
SpoLLlng" by Lhe Camden CoallLlon of PealLh Care Þrovlders.
• lncorporaLe a predlcLlve modellng program Lo ldenLlfy currenL and fuLure cases.
• ldenLlfy and lnLegraLe budgeL lnlLlaLlves Lo supporL and provlde synergy.
• ldenLlfy acuLe lnpaLlenL lndlvlduals who should be ln a lesser resLrlcLlve seLLlng.
• uevelop galn-sharlng sLraLegy for any care-managemenL enLlLy.

Interagency Impact: All uPS dlvlslons wlll parLlclpaLe wlLh varylng operaLlonal cosLs.
Þrov|der]Commun|ty Impact: uecrease ln hosplLal uLlllzaLlon wlLh an lncrease ln care coordlnaLlon ln a
medlcal home. lndlvldual and famlly careglvers wlll be acLlvely lnvolved ln
LreaLmenL declslons.
Iedera| Change Impact: none
1|metab|e: 8egln process ln SepLember 1, 2013.

32
4. Cpt|m|z|ng 1h|rd Þarty L|ab|||ty (1ÞL)
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($1,300,000) Lo ($2,100,000)
lederal lunds ($3,300,000) Lo ($4,900,000)
1oLal lunds ($3,000,000) Lo ($7,000,000)

Descr|pt|on
SLaLe Medlcald agencles operaLe as Lhe payer of lasL resorL. SLaLes ldenLlfy poLenLlal Lhlrd-parLy
paymenL and use elLher a cosL-avoldance sLraLegy or pay-and-chase. lor mosL Lhlrd parLles, sLaLes blll
dlrecLly Lo obLaln recoverles. Slnce sLaLes cannoL blll Medlcare dlrecLly Lhey can elLher recover money
lmmedlaLely or walL a speclfled amounL of Llme Lo seek recoupmenL. ln Arkansas, when Medlcare
balances are Lhen submlLLed for deducLlbles and colnsurance, paymenLs ofLen exceed Medlcald fee
llmlLs. Arkansas Medlcald recovered $33 mllllon from provlders ln l? 2010 and $27.9 mllllon ln l? 2012.

When an adulL ls ldenLlfled as havlng oLher prlvaLe lnsurance coverage Lhe member's commerclal
lnsurance or employer-sponsored lnsurance (LSl) becomes prlmary and Medlcald fee-for-servlce ls
secondary. 1he 1ÞL dlvlslon relles prlmarlly on self-reporLlng by enrollees Lo provlde lnformaLlon on
prlvaLe healLh lnsurance. 1he ulvlslon of Medlcal Servlces has ldenLlfled lack of enforcemenL and
penalLles as a barrler Lo provlder compllance (Cfflce of lnspecLor Ceneral, !an. 2013). Arkansas Medlcald
cosL avoldance efforLs were $27 mllllon ln l? 2010 and $30.2 mllllon ln l? 2012.

Þroposa|
1. 1he ulvlslon of Medlcal Servlces (uMS) should adopL a Medlcald relmbursemenL schedule for
Medlcare colnsurance and deducLlbles for lnpaLlenL and ouLpaLlenL hosplLal servlces LhaL do noL
exceed Lhe lesser of allowable Medlcare or Medlcald paymenLs for Lhose respecLlve servlces.
2. LeglslaLlon should be adopLed Lo requlre all Medlcald provlders Lo share daLa on LSl on a Llmely
basls.

1he savlngs esLlmaLe assumes Lhese Lwo provlslons wlll lncrease currenL recovery and cosL avoldance
efforLs by approxlmaLely Len percenL.

Interagency Impact: SysLem changes wlll be necessary. LeglslaLlon requlred.
Þrov|der]Commun|ty Impact: Þrovlders would need Lo ad[usL Lo a reflned clalms sysLem.
Iedera| Change Impact: none.
1|metab|e: !anuary 1, 2014


33
S. Se|f-keported Serv|ces
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($600,000) Lo ($900,000)
lederal lunds ($1,400,000) Lo ($2,100,000)
1oLal lunds ($2,000,000) Lo ($3,000,000)

Descr|pt|on
1he ueparLmenL Puman Servlces (uPS) provldes a mulLlLude of servlces for varlous populaLlons where
Lhe servlce ls provlded ln Lhe communlLy, such as chlld-care and home- and communlLy-based servlces.
Many of Lhe servlces Lo whlch Lhe deparLmenL has flscal responslblllLy are rendered Lhrough a self-
reporLed model. lor lnsLance, many home- and communlLy-based servlces (PC8S) are rendered Lhrough
an aLLendanL vlslL Lo a home followlng a care plan, and chlld-care servlces are based upon aLLendance
plans esLabllshed wlLh reclplenLs. 1he aLLendanLs and chlld-care provlders self-reporL Lhe vlslLs and
aLLendance respecLlvely Lhe deparLmenL, and paymenLs are lssued based upon Lhe reporLs ln
con[uncLlon wlLh Lhe esLabllshed plans. ÞaymenLs for provlders are made Lo a flnanclal lnLermedlary ln
advance of servlce dellvery for whlch Lhere ls currenLly no reconclllaLlon.

Self-reporLlng processes are merlL-based, error prone, and sub[ecL Lo fraud, wasLe, and abuse. Cne of
Lhe flrsL Lasks ln an audlL ls Lo ldenLlfy Lhe conLrols an organlzaLlon has ln place Lo ensure Lhe lnLegrlLy of
operaLlonal processes. 1he lack of conLrols relaLed Lo self-reporLed servlce Lracklng ls an obvlous flscal
rlsk. Where conLrols are lacklng, lL ls dlfflculL Lo esLlmaLe Lhe assoclaLed cosLs because lnformaLlon ls
lacklng. 1he meLhodology used Lo esLlmaLe Lhe cosLs are derlved from organlzaLlons LhaL addressed Lhe
same lssue. Los Angeles CounLy conducLed a sLudy and concluded wlLh an expecLed reLurn on
lnvesLmenL of $6.8 mllllon by ldenLlfylng chlld-care paymenLs pald for non-exlsLenL or oversLaLed care.
1he excess expendlLures due Lo self-reporLed servlces for Arkansas are conservaLlvely esLlmaLed aL $2 Lo
$3 mllllon.

Þroposa|
• 8evlse pollcy, regulaLlons, and conLracLs as approprlaLe Lo permlL paymenL processes based
upon servlces rendered.
• ldenLlfy Lhe prlorlLlzaLlon sequence for speclflc self-reporLed program changes.
• LsLabllsh basellne meLrlcs and a monlLorlng process Lo measure ouLcomes.
• 8egln a check-ln and checkouL process for self-reporLed servlces.
• LsLabllsh audlLs and conLrols Lo reconclle provlder paymenLs wlLh servlces rendered and deflne
long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.

Interagency Impact: Self-reporLed servlces wlll be pald Lo sLaff for servlces rendered.
Þrov|der]Commun|ty Impact: Þrovlders wlll collecL speclflc servlce encounLers.
Iedera| Change Impact: none
1|metab|e: A manual process can begln !anuary 2014, auLomaLlon !uly 2014.


34
6. nosp|ce Cost keduct|on
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($300,000) Lo ($600,000)
lederal lunds ($700,000) Lo ($1,400,000)
1oLal lunds ($1,000,000) Lo ($2,000,000)

Descr|pt|on
ÞaymenL for hosplce servlces by Arkansas Medlcald has been a ma[or growLh area. Posplce care
lncreased from $13.1 mllllon ln 2003 Lo $30.4 mllllon ln Sl? 2012. ÞaymenLs lnclude ln-home care as
well as room and board ln a nurslng faclllLy. nurslng-home relmbursemenL ls pald Lo Lhe hosplce aL 93
percenL of Lhe dally raLe ($130). 1he hosplce Lhen remlLs LhaL amounL Lo Lhe nurslng faclllLy. ln-home
hosplce lncludes professlonal servlces for nurses and resplLe. Þrlor auLhorlzaLlon ls noL requlred.
uPS does noL reporL nurslng-home bed days for hosplce undersLaLlng Lhe Lrend ln LoLal faclllLy days.

Þroposa|
• uevelop a prlor auLhorlzaLlon program for lnpaLlenL hosplce servlces, lncludlng a cllnlcal revlew
for approprlaLeness.
• ConsolldaLe hosplce-nurslng expendlLures ln Lhe nurslng-home llne lLem.
• ln addlLlon, uPS should develop procedures Lo prevenL paymenLs Lo oLher communlLy provlders
for servlces lncluded ln hosplce elecLlon.

Savlngs ls based on a 3-percenL reducLlon ln uLlllzaLlon due Lo prlor auLhorlzaLlon of servlce.

Interagency Impact: SLaLe plan amendmenL requlred.
Þrov|der]Commun|ty Impact: nurslng home provlders wlll llkely provlde reslsLance.
Iedera| Change Impact: none.
1|metab|e: lnlLlaLlves can be lmplemenLed beglnnlng !uly 1, 2014.

33
7. kestructure Þrograms for Þersons w|th Deve|opmenta| D|sab|||t|es
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($1,300,000) Lo ($2,700,000)
lederal lunds ($3,300,000) Lo ($6,300,000)
1oLal lunds ($3,000,000) Lo ($9,000,000)

Descr|pt|on
Servlce for persons wlLh developmenLal dlsablllLles (uu) ls Lhe Lhlrd largesL Medlcald caLegory afLer
hosplLals and nurslng homes. More Lhan $600 mllllon ln behavloral and medlcal servlces are spenL
annually for communlLy walver servlces (AlLernaLlve CommunlLy Servlces-ACS), smaller prlvaLe and
large sLaLe-run resldenLlal seLLlngs (lnLermedlaLe Care laclllLles-lCl/uu) and cllnlc-based rehablllLaLlve
servlces. ln l? 2012, Lhe ACS walver served 4,033 lndlvlduals and 1,360 were ln one of LhlrLy-slx lCl/uus
(excludlng chlldren).

Arkansas bases paymenL Lo Lhe lCl/uu faclllLles on allowable cosLs and pays fee for servlce for oLher
supporL and medlcal needs. 1here ls llLLle coordlnaLlon and overslghL of LoLal per-person fundlng levels.
Arkansas wanLs Lo change Lhe sysLem so LhaL someone ls responslble for Lhe paLlenL's overall healLh.
1he sLaLe ls currenLly pursulng a long-Lerm care balanclng-lncenLlve program LhaL wlll coordlnaLe care
for lndlvlduals ln a healLh home. Powever, lL ls noL clear how Lhls lnlLlaLlve wlll elLher bend Lhe cosL
curve for hlgh-end resldenLlal placemenLs or lnsure LhaL persons are assesslng Lhe mosL approprlaLe and
cosL-effecLlve care.

Shared llvlng ls an opLlon avallable for adulLs who cannoL llve alone and requlre a conslderable amounL
of help wlLh dally-llvlng acLlvlLles, such as eaLlng, dresslng, and personal hyglene. Shared llvlng provldes
an alLernaLlve Lo lnsLlLuLlonal care for Lhose LhaL meeL cllnlcal, flnanclal, and oLher program crlLerla.
Shared llvlng ls an lndlvldual-dlrecLed servlce deslgned Lo maxlmlze reclplenL conLrol and cholce over
servlces provlded.

Þroposa|
1hls lnlLlaLlve wlll help relocaLe or dlverL approxlmaLely 10 percenL of lCl/uu resldenLs lnLo communlLy
placemenLs by changlng currenL pollcy Lo use shared-llvlng arrangemenLs (SLAs) when 24-hour
resldenLlal placemenL ls requlred. SLAs (when cllnlcally approprlaLe) are less Lhan half Lhe cosL of prlvaLe
group homes.

now |t Works: Shared llvlng provldes a home-llke seLLlng for lndlvlduals who cannoL llve alone buL who
wanL Lo conLlnue Lo llve ln Lhe communlLy as long as posslble. 1here are Lwo componenLs Lo
undersLandlng shared llvlng: (1) Lhe shared llvlng agency and (2) Lhe careglver and Lhe hosL home. 1he
shared llvlng agency helps lndlvlduals who need care Lo flnd an approprlaLe hosL home/careglver. 1hls
may be someone Lhe lndlvldual already knows, llke a relaLlve, nelghbor, or frlend. 1he agency wlll
ºmaLch" Lhe lndlvldual wlLh a careglver and wlll make sure Lhe careglver recelves all needed Lralnlng and
supporL.

1he Careglver/PosL Pome: 1yplcally, Lhe careglver llves ln hls or her own home and agrees Lo have
reclplenL llve wlLh hlm or her. ln some slLuaLlons, Lhe careglver may agree Lo move lnLo Lhe reclplenL's
home. 1he careglver recelves a sLlpend based on level of care.

36
WlLh Lhe use of a communlLy/home based sysLem of care, Lhe dlvlslon wlll be able Lo slgnlflcanLly reduce
Lhe number of hlgh-end resldenLlal placemenLs and provlde a more-approprlaLe and less-resLrlcLlve level
of care.



Interagency Impact: uPS pollcy, regulaLory, and conLracLual changes.
Þrov|der]Commun|ty Impact: uevelopmenLal-dlsablllLy advocaLes wlll supporL lf parL of assessmenL
process.
Iedera| Change Impact: SLaLe plan amendmenL.
1|metab|e: Þhase ln over 30 monLhs beglnnlng !anuary 2014.

Facility
Current
Population
Annual
Residential
Cost
Estimated
Per Person
SLA Savings
Residents
Using
SLAs
Annual
Savings
Target
Human Development Centers
1
1,010 $126,500 $63,250 100 $6,325,000
Private ICF/ID 350 $72,800 $36,400 35 $1,274,000
Total 135 $7,599,000
!"#$: (1) %
uman Development Centers are state run facilities. Initial savings would be less as fixed costs adjust to the
census decrease.

37
8. nome & Commun|ty 8ased Serv|ces Þromot|on
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($12,000,000) Lo ($13,000,000)
lederal lunds ($28,000,000) Lo ($33,000,000)
1oLal lunds ($40,000,000) Lo ($30,000,000)

Descr|pt|on
Arkansas expended an average of $29,713 per person for long-Lerm care servlces and an average of
$9,798 per person for home- and communlLy-based servlces (PC8S) ln l? 2009-10. 1here were 24,013
reclplenLs aL a LoLal cosL of $713,334,610 recelvlng long-Lerm care servlces and 26,369 reclplenLs aL a
LoLal cosL of $238,333,931 ln PC8S durlng Lhe same perlod. Long-Lerm servlce requlremenLs are
dlfferenL for each lndlvldual, and Lhe ablllLy Lo relocaLe lndlvlduals lnLo communlLy seLLlng ls dependenL
upon meeLlng Lhe lndlvldual speclflc needs.

8elocaLlng a greaLer proporLlon of Lhe nurslng faclllLy populaLlon lnLo PC8S wlll reduce cosLs
subsLanLlally. Movlng 10 percenL (approxlmaLely 2,400) of Lhe long-Lerm care populaLlon lnLo PC8S wlll
resulL ln cosL reducLlons of $47,796,373.

Þroposa|
• ueflne Lhe condlLlons ln whlch resldenLs of nurslng faclllLles have permlLLed relocaLlon lnLo
communlLy seLLlngs.
• Assess Lhe barrlers of Lhe currenL nurslng faclllLy populaLlon LhaL prevenL relocaLlon Lo
communlLy seLLlngs.
• uLlllze lndlvldual assessmenLs Lo creaLe Lallored developmenL plans Lo move lndlvlduals lnLo
communlLy seLLlngs.
• LsLabllsh basellne meLrlcs and a monlLorlng process Lo measure ouLcomes.
• valldaLe vehlcle ownershlp prlor Lo auLhorlzlng vehlcle purchase allowances.
• 8ebalanclng fundlng (see below)

Arkansas, llke many oLher sLaLes, has seen conLlnulng decreases ln nurslng-faclllLy bed days (4 percenL
reducLlon slnce l? 2003). 8ecause lnsLlLuLlonal spendlng ls segregaLed from communlLy spendlng ln Lhe
budgeL, any such savlngs from Lhe reducLlon ln nurslng-home days were avallable for Lhe Ceneral lund
and were noL dlrecLly reallzed or uLlllzed by elderly or dlsabled persons ln less resLrlcLlve seLLlngs. 1he
sLaLe should comblne nurslng-home expendlLures and communlLy spendlng lnLo one llne lLem ln Lhe
Medlcald budgeL. As such, any nurslng faclllLy savlngs from rebalanced approprlaLlons can be uLlllzed
and wlll be avallable for PC8S for elders or adulLs wlLh dlsablllLles. LeglslaLlon should be developed
requlrlng a consensus esLlmaLe of nurslng home bed days and per dlems. 1racklng Lhls progress along
wlLh Lhe proper assessmenL of appllcanLs wlll ensure LhaL savlngs achleved ln per-person communlLy
cosLs wlll noL be offseL by nurslng-home placemenLs

ln addlLlon, Lhe provlder capaclLy wlll be enhanced ln order Lo provlde addlLlonal cholces by:
• ueveloplng shared-llvlng alLernaLlves.
• ueveloplng a medlcaLlon-managemenL program.
• lncreaslng PC8S raLes LhaL are Lled Lo performance by uslng Lhe rebalanced approprlaLlons.


38
Interagency Impact: Agencles LhaL provlde long-Lerm care communlLy supporLs and servlces wlll experlence
an lncrease ln servlce needs.
Þrov|der]Commun|ty Impact: Agencles LhaL provlde long-Lerm care lnsLlLuLlonal supporLs and servlces wlll
experlence a decrease ln servlce needs.
Iedera| Change Impact: Walver amendmenL or sLaLe plan amendmenL.
1|metab|e: Þrocess can begln !anuary 2014


39
9. nome & Commun|ty 8ased Serv|ces DAAS
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($1,300,000) Lo ($2,100,000)
lederal lunds ($3,300,000) Lo ($4,900,000)
1oLal lunds ($3,000,000) Lo ($7,000,000)
Descr|pt|on
1he uPS ulvlslon of Aglng and AdulL Servlces (uAAS) admlnlsLers Pome & CommunlLy 8ased Servlces
(PC8S) Medlcald Þrograms lncludlng nurslng-home alLernaLlves provlded by Lhe AlLernaLlves for AdulLs
wlLh Þhyslcal ulsablllLles (AAÞu), self-dlrecLed lndependenLCholces Þrogram, and Lhe Llvlng Cholces
AsslsLed Llvlng Þrogram. ln l? 2012, Lhese programs cosL Arkansas Medlcald more Lhan $80 mllllon. ln
Arkansas, reglsLered nurses and physlclans are auLhorlzed Lo deLermlne Lhe level of care requlred and
assess Lhe amounL of servlces a reclplenL needs.

Whlle mosL Arkansas Medlcald clalms are processed Lhrough Lhe flscal agenL responslble for Lhe MMlS,
a Lhlrd-parLy flnanclal lnLermedlary recelves paymenL for servlces prlor Lo dellvery for Lhese PC8S
provlders. ln l? 2012 Lhls vendor was pald $1.8 mllllon. lL ls noL clear whaL addlLlonal value Lhls servlce ls
provldlng. ln addlLlon, based on a 2012 ulvlslon of LeglslaLlve AudlL (uLA) revlew, lL appears prospecLlve
paymenLs and refunds are noL rouLlnely reconclled.

Savlngs are based on boLh a 3-percenL reducLlon ln AAÞu, lndependenLCholces, and Lhe Llvlng Cholces
AsslsLed Llvlng walver programs.

Þroposa|
• LllmlnaLe Lhe flnanclal agenL conLracL and allow Lhe MMlS vendor Lo make dlrecL paymenL Lo
PC8S provlders. lf necessary, Lhese paymenLs should be dlrecLed Lhrough Lhe Area Agency on
Aglng or oLher organlzaLlons LhaL acL as Lhe case managers and responslble for coordlnaLlon and
monlLorlng care. 1hese agencles are ofLen reached when emergency slLuaLlons arlse for dellvery
of care.
• 8equlre uPS/provlder-organlzaLlon case managers responslble for monlLorlng Lhe acLlvlLy and
coordlnaLe care Lo malnLaln more deLalled documenLaLlon, lncludlng sLaLus of crlLlcal medlcal
changes, Lo allow for beLLer paymenL reconclllaLlon and dellvery of care.
• LllmlnaLe Lhe assessmenL by uPS nurses for ellglblllLy and requlre a physlclan revlew and
approval for Lhe AAÞu, lndependenLCholces, and Lhe Llvlng Cholces AsslsLed Llvlng Þrogram.
CurrenL walver requlremenLs malnLaln LhaL a beneflclary musL meeL nurslng-home level of care
and currenLly allow for uPS reglsLered nurses Lo make Lhe deLermlnaLlon. All oLher sLaLe
programs LhaL requlre nurslng-home level-of-care deLermlnaLlon are requlred Lo be revlewed
and approved by physlclan. 1hls proposed sLep would allgn Medlcald programs and medlcal
necesslLy, resulLlng ln beLLer ouLcomes and placemenL for reclplenLs.

Interagency Impact: CoordlnaLe wlLh uPS ConLracLs Cfflce.
Þrov|der]Commun|ty Impact: SLakeholders should be lnformed of changes ln revlew process.
Iedera| Change Impact: none
1|metab|e: SofLware changes can be accompllshed by CcLober 1, 2013.


60
10. Inpat|ent Acute-Care kate kestructur|ng
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($1,800,000) Lo ($3,000,000)
lederal lunds ($4,200,000) Lo ($7,000,000)
1oLal lunds ($6,000,000) Lo ($10,000,000)

Descr|pt|on
ln Sl? 2012, Arkansas Medlcald relmbursemenL Lo communlLy hosplLals exceeded $ 1 bllllon, lncludlng
all paymenLs. Cf Lhls amounL, more Lhan $420 mllllon represenLs fee-for-servlce clalms Lo hosplLals for
lnpaLlenL servlces on a cosL basls wlLh year-end reconclllaLlon. Cnly a handful of sLaLes conLlnue Lo use
Lhls approach. MosL oLher sLaLes have moved Lo elLher a modlfled ulagnosls-8elaLed Croup (u8C) or a
flaL per dlem. 1he u8C creaLes a raLe-of-paymenL based on Lhe ºaverage" cosL Lo dellver care (bundled
servlces) Lo a paLlenL wlLh a parLlcular dlsease. CommunlLy hosplLals reporL losses each year and asserL
LhaL, overall, Medlcald fundlng ls Loo low. Powever, paymenL for aL leasL cerLaln caLegorles of servlces ls
Loo hlgh when [udged agalnsL Lhe Medlcare benchmark. Movlng Lo a case-base relmbursemenL wlll
supporL a balanced and more raLlonal uLlllzaLlon of servlces.

Þroposa|
Movlng Lo a modlfled u8C sysLem can be accompllshed under Lhree dlsLlncL scenarlos.
1. 8udgeL neuLral-exlsLlng resources are re-arrayed across all hosplLals wlLh some wlnners and
some losers.
2. Pold Parmless-same as budgeL neuLral excepL LhaL losers are lnsulaLed form loss.
3. neL Savlngs-uPS would benchmark lLs paymenL Lo a seL relaLlonshlp agalnsL Medlcare wlLhouL
regard Lo hosplLal-level lmpacL.

lf opLlon 3 ls adopLed, we would recommend a 2-percenL benchmark dlscounL used as Lhe basls for
lnsLlLuLlng u8C speclflc relaLlve welghLs. Þregnancy, dellvery, and neonaLal-lnLenslve care (nlCus)
comprlse one of several cllnlcal areas prlorlLlzed for posslble lncluslon ln Lhe 2012 Arkansas ÞaymenL
lmprovemenL lnlLlaLlve. 1hese new prospecLlve paymenLs would have Lhe added beneflL of rewardlng
hlgh-performlng nlCu provlders and more fully uLlllze crlLerla such as blrLh welghL and cllnlcal severlLy.

Interagency Impact: SysLem changes wlll be needed. ConLracL Lo develop u8C.
Þrov|der]Commun|ty Impact: Consumer and legal advocaLes wlll llkely oppose.
Iedera| Change Impact: CMS Approval, SLaLe Þlan Approval, and Þubllc noLlce.
1|metab|e: !uly 2014 -!uly 2016.


61
11. Lmergency Department V|s|ts
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($390,000) Lo ($340,000)
lederal lunds ($910,000) Lo ($1,260,000)
1oLal lunds ($1,300,000) Lo ($1,800,000)

Descr|pt|on
ln Sl? 2009, Medlcald beneflclarles lncurred approxlmaLely 70,000 emergency deparLmenL (Lu) vlslLs
LhaL dld noL resulL ln a hosplLal admlsslon. Cver Lhe pasL several years, a greaLer proporLlon of Lu vlslLs
are coded for hlgher raLe relmbursemenL. WlLhln llS from 2002-2009, lower-end codes decllned from
32 percenL Lo 11 percenL, and hlgher-end codes lncreased from 6 percenL Lo 22 percenL. 1here has been
a 33 percenL lncrease ln Lhe level of uLlllzaLlon per-1,000 enrollees. lL ls unllkely Lhe lncrease ls
assoclaLed wlLh a proporLlonal lncrease of Lrue emergencles, ºup-codlng" Lo hlgher levels of severlLy ls
one cause.

1he 8and CorporaLlon reporLed ln 2013 LhaL many prlmary-care pracLlces do noL offer afLer-hours or
weekend care, and many surveyed paLlenLs percelve LhaL Lhey cannoL easlly conLacL Lhelr healLh-care
provlder. 1he flndlngs suggesL LhaL assessmenLs conducLed ln Lhe Lu can be needlessly cosLly relaLlve Lo
Lhe resulLlng beneflLs. lncenLlvlzlng care recelved ln alLernaLlve ambulaLory seLLlngs and dls-lncenLlvlzlng
hlgher-cosL care ln emergency-room seLLlngs can reduce Lhe cosLs and malnLaln adequaLe care. Arkansas
expended $21,687,367 for emergency room servlces ln 2010.

Þroposa|
LsLlmaLes assume 8.4 percenL of Lu clalms would be ad[usLed and 3 percenL shlfLed Lo alLernaLlve care.
• 8evlew Lu vlslLs for Lwo flscal years Lo deLermlne Lhe lncldenLs of ºup-codlng."
• 8evlew codlng of Lu vlslLs by Lhe faclllLy/physlclan Lo ldenLlfy dlscrepancles.
• ueflne Lhe condlLlons ln whlch lndlvlduals seek medlcal LreaLmenL ln Lhe Lu.
• Assess Lhe barrlers Lo obLalnlng medlcal LreaLmenL ln alLernaLlve seLLlngs.
• CreaLe lncenLlves Lo seek alLernaLlve care and dlslncenLlves Lo seek Lu care.
• LsLabllsh basellne meLrlcs and a monlLorlng process Lo measure ouLcomes.
• 8evlse pollcy, regulaLlons, and conLracLs as approprlaLe Lo permlL enforcemenL of lncenLlve-
based changes Lo servlce seLLlngs

Interagency Impact: Þollcy, regulaLory, and conLracLual changes
Þrov|der]Commun|ty Impact: Lmergency rooms wlll experlence a decrease ln servlce needs wlLh an
lncrease ln alLernaLlve servlce seLLlngs.
Iedera| Change Impact: none
1|metab|e: Þrocess can begln ln !anuary 2014.

62
12. Þre-Þayment Med|ca|d C|a|m Ver|f|cat|on
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($1,212,000) Lo ($1,638,000)
lederal lunds ($2,828,000) Lo ($3,822,000)
1oLal lunds ($4,040,000) Lo ($3,460,000)

Descr|pt|on
1he cosL of healLh-care fraud poses a slgnlflcanL LhreaL Lo prlvaLe healLh-care payers and undermlnes Lhe
lnLegrlLy of publlcly funded healLh. 1he naLlonal PealLh Care AnLl-lraud AssoclaLlon (nPCAA) esLlmaLes
conservaLlvely LhaL 3 percenL of all healLh-care spendlng-or $68 bllllon per year-ls losL Lo healLh-care
fraud. lor many years, healLh-care payers have used a reLrospecLlve ºpay and chase" meLhodology ln
Lhelr aLLempLs Lo combaL fraud and lmproper paymenLs. 1hls ls lnconslsLenL wlLh real healLh-care fraud
paLLerns, whlch are dynamlc and qulckly adapL Lo new recovery and fraud, wasLe, and abuse efforLs.
uPS needs wlll beneflL by swlLchlng from a reLrospecLlve Lo a prospecLlve meLhod for prevenLlng fraud
before paylng bad clalms. ÞrevenLlon of lmproper paymenLs up fronL wlll reduce program expendlLures
and mlnlmlze operaLlonal cosLs for posL-paymenL recovery acLlvlLles. A pre-paymenL and posL-paymenL
valldaLlon sysLem wlll reduce wasLe, fraud, and abuse.

Þroposa|
1hls lnlLlaLlve wlll move from Lhe pay-and-chase model Lo more upfronL prevenLlon of lncorrecL
paymenLs model. 1he lnlLlaLlve wlll provlde a program where uPS wlll be able Lo edlL more clalms
8LlC8L paylng Lhem. 1he program wlll auLomaLlcally revlew Medlcald clalms for poLenLlal wasLe, fraud,
and abuse before paymenL of Lhe clalms (fee-for-servlce), as well as conducL a posL revlew on clalms
afLer Lhey have been pald. 1he revlew wlll be based on wasLe, fraud, and abuse Lrends as well as daLa
analyLlcs (up-codlng, overbllllng for servlces provlded, excesslve bllllng for unnecessary or over-uLlllzed
servlces, and lnconslsLency due Lo deflnlLlons of medlcal necesslLy), currenL law/regulaLlons, and besL
pracLlces. 8ad clalms wlll be flagged and elLher Lhe clalm wlll be lnvesLlgaLed or senL back Lo Lhe provlder
as a bad clalm by Lhe vendor or sLaff. 1he savlngs numbers assume 33 percenL of all fraud, wasLe, and
abuse wlll be capLured upfronL.

Interagency Impact: SysLem changes wlll be needed
Þrov|der]Commun|ty Impact: Some provlders may oppose as Lhls could delay paymenLs lf ºbad clalms" are
submlLLed buL are acLually valld
Iedera| Change Impact: none
1|metab|e: !anuary 2014

63
13. Annua| & Sem|-Annua| Case kev|ews
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($13,000,000) Lo ($24,000,000)
lederal lunds ($33,000,000) Lo ($36,000,000)
1oLal lunds ($30,000,000) Lo ($80,000,000)

Descr|pt|on
Shrlnklng budgeLs, lncreaslng caseloads, and sLafflng consLralnLs creaLe operaLlonal burdens.
MalnLalnlng annual, seml-annual, or monLhly case revlews ofLen become Lhe vlcLlm of Lhe lncreaslng
workload. MalnLalnlng cases LhaL are overdue for revlews creaLes unnecessary excess consumpLlon of
sLaLe-budgeL resources.

1yplcally, 20 Lo 23 percenL of overdue revlews resulL ln Lhe dlsconLlnuance of a case resulLlng ln an
annual excess expendlLure of $30 Lo $80 mllllon. CosL-savlngs esLlmaLes are based upon Lhe currenL
Medlcald populaLlon and Lhe currenL average annual cosL of $3,914. LsLabllshlng a loglcal progresslve
meLhodology Lo compleLlng Lhe revlews can subsLanLlally reduce cosLs and free scarce budgeL resources
Lo lnvesL ln permanenL lnnovaLlve soluLlons LhaL slgnlflcanLly lmprove operaLlonal efflclencles.

Þroposa|
• LxLracL a basellne from Lhe AnSWL8 sysLem comprlsed of a compleLe llsL of all annual and seml-
annual cases revlews LhaL a have a due daLe LhaL ls noL currenL.
• Analyze Lhe daLa and ldenLlfy opporLunlLles Lo make mass updaLes Lo groups of cases.
• lllLer Lhe llsL by caLegory, due daLe, and operaLlonal locaLlon responslble for processlng.
• ÞrlorlLlze Lhe llsLs based upon greaLesL lmpacL and dlsLrlbuLe for processlng.
• LxecuLe Lhe exLracLs used Lo esLabllsh Lhe basellne on a regular frequency Lo measure ouLcomes
and conLlnue Lo re-prlorlLlze Lhe remalnlng workload.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.

Interagency Impact: none
Þrov|der]Commun|ty Impact: Case revlew process should be communlcaLed Lo advocacy groups.
Iedera| Change Impact: none
1|metab|e: Þrocess can begln !uly 2013.

64
14. CMV Access for Iront Lnd Detect|on Un|t
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($340,000) Lo ($720,000)
lederal lunds ($1,260,000) Lo ($1,680,000)
1oLal lunds ($1,800,000) Lo ($2,400,000)

Descr|pt|on
uPS ellglblllLy Lechnlclans valldaLe lnformaLlon reporLed on Lhe appllcaLlons ln deLermlnlng ellglblllLy for
welfare programs. lnformaLlon malnLalned by Lhe Cfflce of MoLor vehlcles (CMv) ls noL avallable Lo
ellglblllLy sLaff ln an elecLronlc formaL, and uPS sLaff musL vlslL Lhe CMv ln person for verlflcaLlons. 1he
lnefflclenL process lncreases cosLs due Lo non-value added labor, overLlme, and Lravel cosLs.

Arkansas lssues 77 percenL of Lhe supporLlve servlces assoclaLed wlLh Lhe 1ranslLlonal LmploymenL
AsslsLance and Lhe Work Þays programs relaLed Lo LransporLaLlon amounLlng Lo $1,322,497. SLaLes have
ldenLlfled lndlvlduals requesLlng vehlcle purchase allowances currenLly own a vehlcle ln 23 percenL of
requesLs.

Þroposa|
1he deparLmenL would requesL query access from Lhe CMv Lo verlfy demographlc lnformaLlon and
vehlcle ownershlp on cllenLs applylng for uPS programs. uPS ellglblllLy Lechnlclans would lmmedlaLely
valldaLe lnformaLlon reporLed on Lhe appllcaLlons wlLhouL vlslLlng Lhe CMv. Savlngs would come from
lmproved ellglblllLy monlLorlng of programs Lo reduce fraud and abuse as well as sLaff hours, overLlme,
and mlleage savlngs. Cur analysls shows a cosL savlngs of $1,848,372 from a 10-percenL lncrease ln cases
found Lo be lnellglble wlLh overLlme and mlleage savlngs. Cur analysls shows a cosL savlngs of $2.1
mllllon by decreaslng ellglblllLy by 10 percenL and vehlcle purchase allowance by 3 percenL conslderlng
LhaL 3 percenL would be re-allocaLed Lo oLher supporLlve servlces.
• lnsLlLuLe a conLrol process when vehlcle purchase requesLs are recelved.
• CbLaln access Lo CMv Lo verlfy demographlc lnformaLlon and vehlcle ownershlp.
• uevelop a buslness process wlLh Lhe moLor-vehlcle deparLmenL Lo verlfy vehlcle ownershlp and
demographlc lnformaLlon.
• LsLabllsh basellne meLrlcs and a monlLorlng process Lo measure ouLcomes.
• valldaLe vehlcle ownershlp and demographlcs prlor Lo auLhorlzlng ellglblllLy.
• ueflne long-Lerm verlflcaLlon processes.

Interagency Impact: need cooperaLlon from CMv Lo esLabllsh access agreemenLs.
Þrov|der]Commun|ty Impact: uelays could occur ln flnallzlng vehlcle purchases.
Iedera| Change Impact: none
1|metab|e: Þrocess can begln !uly 2013.


63
1S. Non-C|t|zen 8enef|c|ar|es
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($233,000) Lo ($343,000)
lederal lunds ($393,000) Lo ($803,000)
1oLal lunds ($830,000) Lo ($1,130,000)

Descr|pt|on
lollowlng Lhe converslon efforLs assoclaLed wlLh full lmplemenLaLlon of Þ8WC8A, many sLaLes sLlll
possess lndlvlduals under Lhe flve-year ban on federal maLchlng funds who are recelvlng asslsLance ln
vlolaLlon of federal law. 1here may be also be lndlvlduals on Lhe sLaLe's cash asslsLance program, who
had passed Lhe flve-year ban on federal maLchlng funds LhaL remaln on Lhe Medlcald program ln a
caLegory assoclaLed wlLh sLaLe-only fundlng.

SLaLes lncur subsLanLlal cosLs provldlng servlces Lo non-clLlzens. Cuallfled allens who enLered Lhe unlLed
SLaLes before AugusL 22, 1996, are generally ellglble for Medlcald under speclflc ellglblllLy crlLerla.
LxcepL for emergency LreaLmenL, lawfully admlLLed quallfled allens who enLered Lhe unlLed SLaLes on or
afLer AugusL 22, 1996, are barred for flve years from parLlclpaLlon ln Medlcald. CerLaln groups of
quallfled allens are exempL from Lhls flve-year ban. CondlLlons exlsL where adequaLe documenLaLlon ls
noL provlded Lo esLabllsh ellglblllLy for Medlcald, whlch leads Lo subsLanLlal cosLs Lo Lhe sLaLe.

Þroposa|
1he currenL lnlLlaLlve proposes a sofLware change Lo ldenLlfy and documenL quallflcaLlon for coverage
wlLh federal funds. 1he lnlLlaLlve wlll also lnclude a reLroacLlve ad[usLmenL Lo !uly 1, 2012, Lo recover Lhe
over-expendlLure of sLaLe funds on Lhelr behalf. A narrowly deflned sofLware change Lo Lhe ellglblllLy
sysLem ls requlred.
• LxLracL a basellne comprlsed of a compleLe llsL of nonclLlzens.
• Analyze Lhe daLa and updaLe lndlvldual demographlc lnformaLlon.
• updaLe Lhe sysLem Lo capLure daLe of enLry lnLo Lhe unlLed SLaLes and Lhe flve-year bar daLe.
• Add sysLem edlLs and audlLs Lo prevenL lnapproprlaLe beneflL recelpL.
• ldenLlfy poLenLlally lnellglble lndlvlduals and fllLer Lhe llsL by operaLlonal locaLlon responslble for
processlng Lhen dlsLrlbuLe for lnvesLlgaLlon and updaLe.
• LxecuLe Lhe exLracLs used Lo esLabllsh Lhe basellne on a regular frequency Lo measure ouLcomes
and conLlnue Lo re-prlorlLlze Lhe remalnlng workload.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.

Interagency Impact: none
Þrov|der]Commun|ty Impact: An lncrease ln uncompensaLed care may resulL.
Iedera| Change Impact: none
1|metab|e: SofLware changes can be accompllshed by lebruary 1, 2014.


66
16. Se|ect|ve Contract|ng-Durab|e Med|ca| Lqu|pment
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($600,000) Lo ($810,000)
lederal lunds ($1,400,000) Lo ($1,890,000)
1oLal lunds ($2,000,000) Lo ($2,700,000)

Descr|pt|on
1he Medlcald program currenLly relmburses Lhe ma[orlLy of uurable Medlcal LqulpmenL (uML)
7
vendors
based on 93 percenL of Lhe allowable Medlcare relmbursemenL fee schedule or wlLh a Medlcald raLe for
lLems noL covered by Medlcare. lor oLher lLems, such as wheelchalrs, Medlcald relmburses aL raLes
hlgher Lhan Medlcare. ln l? 2012, Arkansas spenL $46,888,327 on uML.

Þroposa|
1he uPS could reallze a mlnlmum 3-percenL savlngs ln Sl? 2014 by selecLlve conLracLlng Lhrough a
llmlLed number of provlders Lo supply uML producLs and who wlll bld a prlce LhaL ls lower Lhan Lhe
Medlcare/Medlcald fee-for-servlce (llS). CuLpaLlenL faclllLles, physlclans, and oLher medlcal provlders
wlll use conLracLed provlders or supply uML lLems aL Lhe conLracLed amounL. SelecLlve conLracLlng wlLh
a compeLlLlve bld process for medlcally necessary uML servlces wlll ellmlnaLe unnecessary opLlons. 1he
reclplenL can be provlded Lhe opporLunlLy Lo purchase Lhe non-medlcally necessary opLlons. 1he
LargeLed savlngs are derlved Lhrough reducLlons ln Lhe esLlmaLed amounL LhaL would have been
expended under currenL llS relmbursemenL. Savlngs can also be reallzed by revlewlng lLems where
Medlcald pays more Lhan Medlcare and Lhen llmlLlng Lhose paymenLs Lo Lhe Medlcare raLes.

ln addlLlon, pollcles and procedures should be developed Lo requlre vendors Lo provlde and make
avallable for revlew dellvery conflrmaLlon of uML producLs.

Interagency Impact: none
Þrov|der]Commun|ty Impact: uML provlders may provlde reslsLance.
Iedera| Change Impact: CMS approval requlred.
1|metab|e: A requesL for proposals may Lake slx monLhs. AlLernaLlvely, lower Lhe relmbursemenL
percenLage and ellmlnaLe manual reLall prlclng (percenL above cosL only).


7. Also known as uurable Medlcal LqulpmenL, ÞrosLheLlcs, CrLhoLlcs, and Supplles (uMLÞCS).

67
17. Data Lxchanges
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($4,300,000) Lo ($7,300,000)
lederal lunds ($10,300,000) Lo ($17,300,000)
1oLal lunds ($13,000,000) Lo ($23,000,000)

Descr|pt|on
uaLa exchanges provlde lnformaLlon from Lhlrd-parLy sources, lnformaLlon used Lo ensure program
ellglblllLy. uaLa-exchange sources provlde mllllons of hlLs each year Lhrough Lhe AnSWL8 sysLem, and
Lhe same budgeL and operaLlonal consLralnLs exlsL as ldenLlfled prevlously. unLlmely case acLlons based
upon Lhe exchange lnformaLlon unduly sLralns sLaLe-budgeL resources.

1yplcally, 13 Lo 20 percenL of overdue daLa exchange resulLs ln Lhe dlsconLlnuance of a case resulLlng ln
excess annual expendlLures of $13 mllllon Lo $23 mllllon. CosL-savlngs esLlmaLes are based upon Lhe
currenL Medlcald-reclplenL populaLlon and Lhe currenL average cosLs. LsLabllshlng a loglcal-progresslve
meLhodology Lo Lake Llmely case acLlons based upon exchange daLa can subsLanLlally reduce cosLs.
8uslness processes Lo lmprove Lhe Llmellness of case acLlons can be funded Lhrough Lhe cosL savlngs
derlved from addresslng Lhe operaLlonal processes wlLh Lhe lnlLlal volume of overdue daLa exchanges.

Þroposa|
• LxLracL a basellne comprlsed of a compleLe llsL of all welfare reclplenLs wlLh daLa exchanges
lnformaLlon LhaL has noL been dlsposed.
• Analyze Lhe daLa and ldenLlfy opporLunlLles Lo make mass updaLes Lo groups of cases.
• lllLer Lhe llsL by caLegory, due daLe, and operaLlonal locaLlon responslble for processlng.
• ÞrlorlLlze Lhe llsLs based upon greaLesL lmpacL and dlsLrlbuLe for processlng.
• LxecuLe Lhe exLracLs used Lo esLabllsh Lhe basellne on a regular frequency Lo measure ouLcomes
and conLlnue Lo re-prlorlLlze Lhe remalnlng workload.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.

Interagency Impact: none
Þrov|der]Commun|ty Impact: 1he daLa-exchange revlew process should be communlcaLed Lo advocacy
groups.
Iedera| Change Impact: none
1|metab|e: Þrocess can begln !uly 2013.


68
18. Ld|ts]Aud|ts]A|erts
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($3,400,000) Lo ($9,000,000)
lederal lunds ($12,600,000) Lo ($21,000,000)
1oLal lunds ($18,000,000) Lo ($30,000,000)

Descr|pt|on
SysLem edlLs, audlLs, or alerLs provlde lnformaLlon from wlLhln Lhe sysLem LhaL lndlcaLes Lhere may be a
change Lo program ellglblllLy of reclplenLs. Mllllons of edlLs, audlLs, or alerLs are generaLed each year
and are dlfflculL Lo manage operaLlonally. LdlLs, audlLs, or alerLs are esLabllshed ln relaLlon Lo speclflc
ellglblllLy crlLerla and fallure Lo Lake acLlon on a case creaLes excess expendlLures when cases should be
modlfled or closed. ln addlLlon, lndependenL audlLlng groups have found several errors relaLed Lo
documenLaLlon of program changes, lncludlng lnsufflclenL approval Lo remove edlL, audlL, and alerLs.
llfLeen Lo 20 percenL of overdue edlLs, audlLs or alerLs are Lyplcally dlsconLlnued whlch resulLs ln
graLulLous annual expendlLures of $18 mllllon Lo $30 mllllon. CosL-savlngs esLlmaLes are based upon Lhe
currenL Medlcald-reclplenL populaLlon and Lhe currenL average cosLs. LsLabllshlng a loglcal-progresslve
alerL handllng meLhodology supporLlng deslred buslness processes can subsLanLlally reduce cosLs and
can be funded Lhrough Lhe cosL savlngs derlved from addresslng Lhe lnlLlal volume of overdue alerLs.

Þroposa|
• LxLracL a basellne comprlsed of a compleLe llsL of all cases LhaL edlLs, audlLs, or alerLs have been
generaLed regardlng ellglblllLy facLors and Lhe ellglblllLy revlew ls noL compleLe.
• Analyze Lhe daLa and ldenLlfy opporLunlLles Lo make mass updaLes Lo groups of cases.
• lllLer Lhe llsL by caLegory, due daLe, and operaLlonal locaLlon responslble for processlng.
• ÞrlorlLlze Lhe llsLs based upon greaLesL lmpacL and dlsLrlbuLe for processlng.
• LxecuLe Lhe exLracLs used Lo esLabllsh Lhe basellne on a regular frequency Lo measure ouLcomes
and conLlnue Lo re-prlorlLlze Lhe remalnlng workload.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.
• lndependenL group can provlde Lhlrd-parLy revlew. 1he new Arkansas Cfflce of lnspecLor
Ceneral could fulflll Lhls funcLlon.

Interagency Impact: none
Þrov|der]Commun|ty Impact: 1he alerL revlew process should be communlcaLed Lo advocacy groups.
Iedera| Change Impact: none
1|metab|e: Þrocess can begln !uly 2013.

69
19. Cut-of-State 8enef|t Usage
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($34,000) Lo ($108,000)
lederal lunds ($126,000) Lo ($232,000)
1oLal lunds ($180,000) Lo ($360,000)
Descr|pt|on
CuL-of-SLaLe beneflL usage ls common wlLh conLlguous sLaLes. lndlvlduals may be uLlllzlng beneflLs
approprlaLely, however susLalned use ln conLlguous sLaLes poLenLlally represenLs welfare reclplenLs of
one sLaLe also recelvlng beneflLs ln anoLher and should be LermlnaLed. AddlLlonally, ouL-of-sLaLe usage
may lndlcaLe border [umplng where Lhere ls a concerLed efforL Lo recelve beneflLs ln mulLlple sLaLes. 1hls
condlLlon ls mosL prevalenL where mulLlple sLaLe borders converge. lor lnsLance, an appllcanL ln
1exarkana, Arkansas, lndlcaLes Lhey are homeless and Lhe counLy offlce lssues expedlLed SnAÞ. 1he
same person subsequenLly goes Lo 1exarkana, 1exas, wlLh Lhe same clalm and agaln recelves anoLher
expedlLed SnAÞ. Pe may Lhen Lravel LhlrLy mlnuLes souLh Lo Loulslana Lo recelve beneflLs, and Lhen 30
mlnuLes norLhwesL Lo Cklahoma Lo obLaln SnAÞ beneflLs agaln. ÞA8lS maLches are Llme delayed, lL Lakes
monLhs Lo ldenLlfy Lhe slLuaLlon, allowlng subsLanLlal lnellglble expendlLures Lo occur.

Þroposa|
ldenLlfylng fraudulenL cases of ouL-of-sLaLe beneflL usage lmproves Lhe lnLegrlLy of any program uslng
Lhe L81 sysLem Lo dlspense beneflLs. uLlllzlng Lhe L81 conLracLor (llS), generaLe reporLs of ouL-of-sLaLe
usage wlll ldenLlfy Lhe populaLlon uslng beneflLs ouLslde Lhe Arkansas borders. A llsL of cases wlLh L81
LransacLlons made excluslvely ouL of sLaLe for Lhree-monLh perlods wlll provlde Lhe llkellhood of ouL-of-
sLaLe resldency. AddlLlonally, esLabllshlng daLa-maLchlng agreemenLs wlLh conLlguous sLaLes can ldenLlfy
Lhese lndlvlduals well ln advance of a ÞA8lS maLch. Savlngs wlll be dlsbursed across mulLlple programs.
1herefore, savlngs esLlmaLes are based upon sLandard maLch raLes.

• LxLracL a compleLe llsL of all lndlvlduals who have uLlllzed Lhe llS-L81 sysLem from an ouL-of-
sLaLe locaLlon.
• Analyze Lhe daLa and ldenLlfy paLLerns of usage Lo deflne ongolng exLracL parameLers and
conLlnue Lhe exLracLs on a monLhly basls.
• lllLer Lhe llsL by Lhe operaLlonal locaLlon responslble for malnLalnlng Lo case and dlsLrlbuLe for
processlng.
• 8equesL verlflcaLlon of resldency from Lhe beneflclary and dlsconLlnue Lhose LhaL fall Lo respond
for falllng Lo respond. Lnsure compllance wlLh lnS resldency closure rules for LhaL respond.
• ConLacL conLlguous sLaLes Lo esLabllsh daLa-maLchlng agreemenLs.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.

Interagency Impact: none
Þrov|der]Commun|ty Impact: none.
Iedera| Change Impact: none
1|metab|e: Manual process can begln !uly 2013, conLlguous sLaLes !anuary 2013.

70
20.Deceased Þerson L||g|b|||ty Data Match
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($373,000) Lo ($600,000)
lederal lunds ($873,000) Lo ($1,400,000)
1oLal lunds ($1,230,000) Lo ($2,000,000)

Descr|pt|on
ueceased-person daLa maLched from Soclal SecurlLy and sLaLe sources provlde lnformaLlon abouL
currenL reclplenLs LhaL are deceased. 1he Soclal SecurlLy lnformaLlon has hlsLorlcally been more Lhan 98-
percenL accuraLe. 1housands of lndlvlduals are reporLed as deceased by Lhlrd-parLy sources each year.
Þrovlders can provlde recoupmenL of some cosLs, buL Lhere are llmlLaLlons.

lallure Lo acL upon Lhe lnformaLlon resulLs ln excess annual expendlLures of approxlmaLely $2 mllllon.
CosL-savlngs esLlmaLes are based upon Lhe currenL Medlcald-reclplenL populaLlon and currenL average
cosLs. LsLabllshlng an efflclenL meLhodology Lo dlsconLlnue deceased lndlvlduals wlll markedly reduce
Lhe cosLs Lo malnLaln Lhe populaLlon. Lnhanced buslness processes Lo remove deceased lndlvlduals can
be funded Lhrough Lhe cosL savlngs obLalned by removlng Lhe lnlLlal deceased populaLlon.

Þroposa|
• LxLracL a basellne comprlsed of a compleLe llsL of all lndlvlduals LhaL have been reporLed as
deceased and approprlaLe acLlon has noL been Laken.
• 8evlew Lhe lnLegrlLy of Lhe source daLa and Lhe dlsposlLlon loglc Lo deLermlne gaps ln Lhe
AnSWL8 sysLem auLomaLed acLlons.
• Analyze Lhe daLa and ldenLlfy opporLunlLles Lo make mass updaLes Lo groups of cases.
• lllLer Lhe llsL by caLegory, due daLe, and operaLlonal locaLlon responslble for processlng.
• ÞrlorlLlze Lhe llsLs based upon greaLesL lmpacL and dlsLrlbuLe for processlng.
• LxecuLe Lhe exLracLs used Lo esLabllsh Lhe basellne on a regular frequency Lo measure ouLcomes
and conLlnue Lo re-prlorlLlze Lhe remalnlng workload.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs.
• Þrocedures need Lo be developed Lo revlew clalms relaLlve Lo deceased persons Lo deLermlne
wheLher paymenLs were made Lo provlders and for Lhe recoupmenL of Lhose funds.

Interagency Impact: none
Þrov|der]Commun|ty Impact: none
Iedera| Change Impact: none
1|metab|e: Þrocess can begln !uly 2013.

71
21. Mod|fy Med|care 8uy-In Auto-Accrete Þrocess
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($600,000) Lo ($1,273,000)
lederal lunds ($1,400,000) Lo ($2,973,000)
1oLal lunds ($2,000,000) Lo ($4,230,000)

Descr|pt|on
1he Medlcare program provldes supplemenLal physlclan coverage Lhrough ÞarL 8. 1he premlums for
ellglble low-lncome households are pald by Lhelr respecLlve sLaLe Lhrough a buy-ln program. 1he sLaLe
buy-ln of Medlcare ÞarL 8 premlums ls done Lhrough an auLo-accreLe process. SLaLes LhaL have chosen
Lo parLlclpaLe ln Lhe process recelve flles from Lhe Soclal SecurlLy AdmlnlsLraLlon (SSA) wlLh Lhe
beneflclarles who have become ellglble for Medlcare ÞarL 8.

1hrough Lhe auLo-accreLe process, Arkansas enrolled 4700 parLlclpanLs lnLo Medlcare ÞarL 8 durlng ll?
2011. 1he CenLers for Medlcare and Medlcald Servlces (CMS) has provlded LhaL ºany Medlcare lee-lor-
Servlce clalm wlLh a daLe of servlce on or afLer !anuary 1, 2010, musL be recelved by your Medlcare
conLracLor no laLer Lhan one calendar year (12 monLhs)-or Medlcare wlll deny Lhe clalm." 1he change
ln Lhe maxlmum perlod for Lhe submlsslon of Medlcare clalms creaLed a slLuaLlon ln whlch premlums are
belng pald and coverage ls belng provlded for perlods ln whlch clalms for prlor servlces cannoL be
recouped. 1he flles recelved wlLh Lhe auLo-accreLe process many Llmes conLaln daLes of coverage LhaL
are ln excess of Lhe perlod ln whlch prlor servlce clalms can be recouped.

1he excess cosL assoclaLed wlLh Lhe Arkansas Medlcare ÞarL A premlum paymenLs amounLs Lo
approxlmaLely $2 mllllon annually and $4.23 mllllon per year ln ÞarL 8 premlums. A change ln Lhe
Medlcare ÞarL A process can be accompllshed locally, however Lhe auLo-accreLe process should be
modlfled by SSA, buL could be done locally.

Þroposa|
• ldenLlfy cases ln whlch Lhe daLe of ellglblllLy deflned ln Lhe Soclal SecurlLy ellglble flle ls greaLer
Lhan 12 monLhs from Lhe currenL daLe.
• 8esLrlcL Lhe reLroacLlve Medlcare ÞarL A premlum paymenL Lo 12 monLhs.
• CbLaln SSA approval Lo modlfy Lhe Medlcare ÞarL 8 premlum calculaLlon.
• 8esLrlcL Lhe reLroacLlve Medlcare ÞarL 8 premlum paymenL Lo 12 monLhs.
• Modlfy Lhe auLo-accreLe process Lo resLrlcL reLroacLlve premlum paymenLs Lo one year.

Interagency Impact: none
Þrov|der]Commun|ty Impact: none
Iedera| Change Impact: SSA wlll need Lo agree Lo updaLe Lhe auLo-accreLe process.
1|metab|e: Þrocess can begln !anuary 2014 for ÞarL A and !uly 2014 for ÞarL 8.

72
22. SSI Suspens|ons
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($233,000) Lo ($343,000)
lederal lunds ($393,000) Lo ($803,000)
1oLal lunds ($830,000) Lo ($1,130,000)

Descr|pt|on
Soclal SecurlLy provldes lnformaLlon regardlng SupplemenLal SecurlLy lncome (SSl) cases Lhrough Lhe
Sux exchange LhaL ls used Lo manage SSl reclplenLs. unLlmely, case acLlons based upon Lhe Sux
exchange generally resulLs ln Lhe dlsconLlnuance of 30 Lo 33 percenL of Lhe SSl lndlvldual changes
reporLed. 1he excess expendlLures LoLal $1 mllllon Lo $1.23 mllllon.

CosL-savlngs esLlmaLes are based upon Lhe currenL SSl-reclplenL populaLlon and Lhe currenL Medlcare
average cosLs. Lnhanclng Lhe processlng meLhodology Lo Lake Llmely case acLlons based upon Lhe SSl-
exchange daLa wlll reduce cosLs and long-Lerm buslness process changes can be funded Lhrough lnlLlal
cosL savlngs.

Þroposa|
• ldenLlfy cases and esLabllsh a basellne of lndlvlduals LhaL Lhe Soclal SecurlLy Sux flle has
ldenLlfled as havlng a change ln SSl ellglblllLy buL approprlaLe acLlon has noL been Laken.
• Analyze Lhe daLa and ldenLlfy opporLunlLles Lo make mass updaLes Lo groups of cases.
• lllLer Lhe llsL by due daLe and operaLlonal locaLlon responslble for processlng.
• ÞrlorlLlze Lhe llsLs based upon greaLesL lmpacL and dlsLrlbuLe for processlng.
• LxecuLe Lhe exLracLs used Lo esLabllsh Lhe basellne on a regular frequency Lo measure ouLcomes
and conLlnue Lo re-prlorlLlze Lhe remalnlng workload.
• ueflne long-Lerm buslness processes Lo reduce operaLlonal lmpacLs and reflne Lhe auLo-SSl
process.

Interagency Impact: LllglblllLy for alLernaLlve healLh-care programs wlll need Lo be explored.
Þrov|der]Commun|ty Impact: none
Iedera| Change Impact: SSA may need Lo approve changes Lo Lhe auLo-SSl process.
1|metab|e: Þrocess can begln !uly 2013.


73
23. Lxpand]kedes|gn Subs|d|zed Lmp|oyment
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds nA
lederal lunds nA
1oLal lunds nA

Descr|pt|on
Subsldlzed employmenL placemenLs lncrease [ob placemenLs for low-lncome workers. Lmployers wlll
parLlclpaLe ln well-run, slmpllfled sysLems of recrulLmenL, placemenL, and relmbursemenL. 8hode lsland
lmplemenLed Lhls deslgn uslng 1Anl-A88A fundlng ln 2010 and 2011. Lmployers, whlle lnlLlally skepLlcal,
dld ln facL creaLe a number of [obs LhaL oLherwlse dld noL exlsL, saw beneflLs Lo Lhelr boLLom llne, and
were eager Lo parLlclpaLe ln slmllar programs agaln. lor-proflL flrms were more llkely Lo reLaln workers
afLer Lhe subsldy ended and were more wllllng Lo parLlclpaLe ln programs wlLh only a parLlal subsldy.
nonproflLs were more moLlvaLed by asslsLlng parLlclpanLs and may be more wllllng Lo Lake on workers
wlLh less educaLlon and work experlence Lo help Lhem galn experlence.

Þroposa|
8ulld a new model of collaboraLlon Lo operaLe subsldlze [obs for 1Anl famllles. Lmployers already reporL
salary and wages earned by 1LA and Work Þays famllles Lhrough uWS and are requlred Lo reporL
corporaLe earnlngs Lhrough Lhe ueparLmenL of 1axaLlon. Meldlng LogeLher Lhese reporLlng sysLems for
1Anl subsldlzed workers promoLes greaLer accuracy for Lhese lndlvlduals ln a way LhaL oLherwlse. 1hls
model of operaLlng 1Anl subsldles faclllLaLes program lnLegrlLy ln all levels of Lhe sysLem, lncludlng
employer reporLlng by maLchlng 1Anl placemenLs wlLh uWS Salary and Wage 8eporLs and ueparLmenL
of 1ax 8evenues relaLed Lo Lhese speclflc employees. Lven Lhough Lhls represenLs a new form of
spendlng for Lhe sLaLe, lL ls reasonable Lo assume LhaL more [obs wlll be creaLed for 1Anl famllles LhaL
would loglcally lmprove Lhe work parLlclpaLlon raLe for Lhe 1Anl program. As lmporLanLly, such
opporLunlLles for worklng famllles wlll lead Lo long Lerm [ob reLenLlon beyond Lhe perlod of Lhe subsldy.

Interagency Impact: uWS and uPS wlll need Lo revlse currenL LSS pollcles as approprlaLe. new
collaboraLlons wlll need Lo be esLabllshed wlLh ueparLmenL of 1axaLlon, lf
subsldlzed employmenL model ls developed. Plgher LducaLlon may be affecLed lf
Career ÞaLhways fundlng ls reduced.
Þrov|der]Commun|ty Impact: SLaLe has sLrong communlLy advocacy neLwork. AnyLhlng LhaL modlfles Lhe
exlsLlng provlslons downward may meeL wlLh opposlLlon.
Iedera| Change Impact: 1Anl SLaLe Þlan ls up for renewal effecLlve CcLober 1, 2013, buL lL can be
submlLLed as laLe as uecember 31, 2013. 1he plan musL be made avallable for
publlc revlew aL leasL 60 days prlor Lo submlsslon. AlLernaLlvely, 1Anl SLaLe
Þlans may be amended even afLer submlsslon. 8ecause PPS does noL approve
plans buL raLher ºaccepLs" Lhem as compleLe, Lhere ls no rlsk of dlsapproval.
1|metab|e: 8egln process lmmedlaLely. See ºlederal Change lmpacL" above.

74
24. kevamp 1ANI 8udget Þr|or|t|es
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds nA
lederal lunds nA
1oLal lunds nA

Descr|pt|on
Accordlng Lo federal PPS Cfflce of lamlly AsslsLance (ClA), 1Anl penalLles remaln a LhreaL ln Lhe fuLure
for all sLaLes. Arkansas ls noL slaLed for a penalLy aL Lhls Llme buL could lncur a penalLy as fundlng levels
and programs conLracL ln Lhe fuLure. lalllng 1Anl Work ÞarLlclpaLlon 8aLes (WÞ8) ls only one of aL leasL
fourLeen dlfferenL penalLles LhaL can be lmposed lf a sLaLe falls Lo comply wlLh varlous requlremenLs. lf
lmposed, 1Anl penalLles are cosLly and can resulL ln a compoundlng loss of funds Lo a sLaLe. Whlle Lhere
may be correcLlve measures avallable Lo a sLaLe, Lhe process ls onerous and creaLes a Lremendous level
of uncerLalnLy whlle Lhe federal revlew and deLermlnaLlon ls made.

Þroposa|
8evamp 1Anl budgeL prlorlLles Lo lmprove ouLcomes, especlally wlLh WÞ8. locus on exlsLlng programs
funded wlLh 1Anl and malnLenance-of-efforL dollars LhaL are expecLed Lo recelve cuLs up Lo 10 percenL
ln 2014 and 2013. Where pracLlcal, esLabllsh performance-based conLracLs/paymenLs wlLh hlgh
performance lndlcaLors of acLlvlLles and ouLcomes, whlch wlll readlly conLrlbuLe Lo helplng Lhe sLaLe
meeL lLs work-parLlclpaLlon raLe of 30 percenL for all famllles and 90 percenL for Lwo-parenL famllles.

8eexamlne currenL pollcles on LxLended SupporL Servlces (LSS) and reduce fundlng of cerLaln caLegorles
of supporL LhaL are leasL lmpacLful on Lhe economlc well-belng of famllles. 8ecause of Lhe rural naLure of
Lhe sLaLe, LransporLaLlon asslsLance ls essenLlal Lo faclllLaLlng parenLal parLlclpaLlon ln work and Lralnlng
acLlvlLles. Powever, Lhere may be opporLunlLles Lo reduce Lhe amounL of dollars commlLLed Lo
LransporLaLlon and oLher LSS ln caLegorles LhaL-by comparlson Lo mosL oLher sLaLes-are exLenslve and
cosLly Lo Lhe Arkansas 1Anl program. 1haL ls, savlngs opporLunlLles may emerge by revlewlng pollcles
relaLed Lo Lwelve monLhs of posL-cash case-managemenL servlces, emergency paymenLs and relocaLlon
expenses up Lo $2,000, and vehlcle down-paymenLs up Lo $2,300. lf fundlng ls no longer avallable, Lhe
sLaLe may choose Lo cuL back on Lhe 24-monLh paymenLs for Work Þays households by slx or Lwelve
monLhs.

Interagency Impact: uPS and uWS wlll need Lo revlse Lhelr respecLlve regulaLlon lf any of Lhese proposals
are accepLed. 1he rule-maklng process requlres sLaLes Lo glve publlc noLlce.
Þrov|der]Commun|ty Impact: Some provlders may recelve addlLlonal fundlng, and Lhe communlLy aL large
beneflLs by lncreased employmenL. As wlLh any lnlLlaLlve percelved Lo reduce
supporL for famllles, Lhe sLaLe needs Lo be ready Lo respond Lo crlLlclsm.
Iedera| Change Impact: lederal 1Anl allows sLaLes broad flexlblllLy ln operaLlng programs as long as sLaLe
follows approprlaLe pollcy and rule-maklng process. CLherwlse, such program
changes wlll noL requlre federal approvals
1|metab|e: 8egln lmmedlaLely.

73
2S. Lxpanded kecovery¬Lstate L|ens
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($1,300,000) Lo ($2,100,000)
lederal lunds ($3,300,000) Lo ($4,900,000)
1oLal lunds ($3,000,000) Lo ($7,000,000)

Descr|pt|on
1he Medlcald LsLaLe 8ecovery Þrogram ls a federal-sLaLe program deslgned Lo recover Medlcald-funded
medlcal cosLs from Lhe esLaLes of Medlcald reclplenLs, lncludlng nurslng-home resldenLs whose cosLs of
care were covered by Medlcald. A clalm may noL be flled where Lhe reclplenL ls under Lhe age of 33 or
where Lhere ls a survlvlng spouse, mlnor chlld, or bllnd/dlsabled chlld. 1he currenL law allows Arkansas
Medlcald Lo flle a clalm ln probaLe courL, flle llens on properLy of Lhe probaLe esLaLe, and recover up Lo
Lhe amounL of Medlcald expendlLures pald on behalf of a reclplenL. ln addlLlon, cerLaln Lransfer of asseLs
prlor Lo or afLer becomlng ellglble, are prohlblLed.

AlLhough Medlcald relmbursemenL Lo prlvaLe nurslng homes exceeds $600 mllllon, currenL esLaLe-
recovery efforLs are mlnlmal. Arkansas has ranked ln Lhe boLLom Lhlrd of sLaLes, collecLlng [usL 0.4
percenL (sLaLes range from 0 percenL Lo 10.4 percenL) of nurslng home spendlng or an annual amounL of
approxlmaLely $2.3 mllllon. 1hls ls due parLly Lo Lhe mlnlmum scope of pollcy opLlons for esLaLe recovery
and a mlnlmal commlLmenL Lo provlde adequaLe admlnlsLraLlve resources, such as lnLegraLed
lnformaLlon sysLems and/or Lralned sLaff.

Þroposa|
• lmpose a llen on properLy of a Medlcald reclplenL durlng hls or her llfeLlme (1Ll8A-1ax LqulLy
llscal 8esponslblllLy AcL) and acL upon LhaL llen upon Lransfer or deaLh. 1hls pracLlce has been
adopLed by LhlrLy-slx sLaLes.
• Lxpand Lhe deflnlLlon of esLaLes Lo permlL Lhe recovery of expendlLures pald on behalf of Lhe
reclplenLs Lo lnclude [olnLly owned properLy prlor Lo Lhe deaLh of Lhe reclplenL.
• Add one aLLorney and one paralegal poslLlon Lo work and ldenLlfy exlsLlng probaLe cases and Lhe
addlLlonal lnvenLory of esLaLes creaLed by Lhls lnlLlaLlve. 1he savlngs (neL of addlLlonal
admlnlsLraLlve cosLs) assume Lhese proposals wlll lncrease collecLlons Lo approxlmaLely 1
percenL of nurslng home spendlng or $6 mllllon. lf Lhe 1Ll8A llen opLlon were noL adopLed, Lhe
esLlmaLe would be reduced Lo $3 mllllon.

Interagency Impact: 8equlres leglslaLlve change and pollcy change.
Þrov|der]Commun|ty Impact: Arkansas 8ar AssoclaLlon, elder-law aLLorneys and sLaLe leglslaLors who are
pracLlclng aLLorneys wlll oppose Lhls leglslaLlon.
Iedera| Change Impact: SLaLe plan amendmenL.
1|metab|e: !anuary 2014-!anuary 2013.


76
26. Ch||dren's nea|th Account Lnhancements
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($900,000) Lo ($1,300,000)
lederal lunds ($2,100,000) Lo ($3,300,000)
1oLal lunds ($3,000,000) Lo ($3,000,000)

Descr|pt|on
Cver Lhe flve-year perlod, l?2007-l?2011, Arkansas spenL an average $200 mllllon for ouLpaLlenL
menLal-healLh servlces and prlvaLe-duLy nurses for chlldren under age 18. 1he acLual savlngs wlll be
based on LoLal clalms for expendlLures speclfled ln leglslaLlon for chlldren wlLh Lhlrd-parLy lnsurance,
sub[ecL Lo a $7,300 cap.

Þroposa|
Arkansas should conslder creaLlng a chlldren's healLh accounL Lo provlde a mechanlsm for Lhe
ueparLmenL of Puman Servlces Lo recoup from lnsurance companles, a porLlon of Lhe expense of
Medlcald-funded servlces for chlldren wlLh speclal healLh-care needs who have some form of
comprehenslve Lhlrd-parLy llablllLy (1ÞL). An assessmenL should be made on every lnsurance company
dolng buslness ln Arkansas LhaL provldes coverage(s) Lo be deLermlned annually based on several
facLors:
1. 1he LoLal premlums wrlLLen durlng Lhe prevlous calendar year by each company assessed.
2. 1he LoLal Medlcald spendlng for Lhe servlces llsLed ln new leglslaLlon (cerLaln home-based and
ouLpaLlenL menLal-healLh servlces and prlvaLe-duLy nurslng).
3. 1he LoLal annual Medlcald spendlng for Lhe servlces llsLed above wlll noL exceed $7,300 per
chlld, per year.

8ased on experlence ln oLher sLaLes, lL ls anLlclpaLed LhaL a mlnlmum of 2 percenL of LoLal clalms would
quallfy (lncludes dlscounL for lnpaLlenL psychlaLrlc servlces and chlldren wlLh no 1ÞL).

Interagency Impact: SysLem changes may be necessary. SLaLuLe ls requlred.
Þrov|der]Commun|ty Impact: lnsurers would oppose Lhls, as lL would resulL ln subsLanLlal lncreases ln Lhe
amounL LhaL Lhey would be requlred Lo pay ln AssessmenLs.
Iedera| Change Impact: none
1|metab|e: !anuary 2014.


77
27. Lnhanced Þreferred Drug L|st - Mn Med|cat|ons
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($900,000) Lo ($2,100,000)
lederal lunds ($2,100,000) Lo ($4,900,000)
1oLal lunds ($3,000,000) Lo ($7,000,000)

Descr|pt|on
lor Sl? 2009, Arkansas menLal-healLh medlcaLlon expendlLures were $102 mllllon. lncluded ln LhaL
caLegory were $60 mllllon for anLlpsychoLlc drugs LhaL represenLed approxlmaLely 18 percenL of LoLal
pharmacy spendlng. CurrenLly, Lhese drug classes are exempL from Lhe Medlcald preferred-drug llsL
(ÞuL). SLaLes have deslgned ÞuLs as a meLhod of encouraglng speclflc drugs for classes of LreaLmenL. As
of 2012, forLy-elghL sLaLes use some Lype of ÞuL, forLy-Lhree of Lhose lnclude anLlpsychoLlcs and forLy-
flve lnclude anLl-depressanLs. 8oLh preferred and non-preferred menLal-healLh drugs would be avallable
Lo Medlcald reclplenLs. Powever, non-preferred drugs would requlre addlLlonal auLhorlzaLlons.

Þroposa|
lnclude anLlpsychoLlcs ln Lhe Arkansas Medlcald Þharmacy Þrogram ÞuL. Savlngs assume LhaL uPS
obLalns 3 percenL of drug cosLs ln supplemenLal rebaLes for Lhese new LherapeuLlc classes and
experlences a 3-percenL reducLlon ln drug lngredlenL cosLs due Lo a shlfL ln markeL share Lo less
expenslve medlcaLlons.

Interagency Impact: unlverslLy of Arkansas
Þrov|der]Commun|ty Impact: CoordlnaLlon wlLh Lhe pharmaceuLlcal lndusLry ls needed. MenLal-healLh
communlLy wlll llkely oppose.
Iedera| Change Impact: none
1|metab|e: !uly 1, 2014.

78
28. Ch||d-Care Þrogram Integr|ty
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds nA
lederal lunds

nA

1oLal lunds

nA

Descr|pt|on
WlLhln Lhe CCul Þlan, Lhe sLaLe has opLed Lo exclude chlld-supporL paymenLs from monLhly lncome
ellglblllLy deLermlnaLlon. Lxcludlng chlld-supporL paymenLs recelved by slngle-parenL appllcanLs and
reclplenLs resulLs ln a greaLer number of famllles belng found lncome ellglble, even Lhough Lhelr Lrue
lncome ls hlgher Lhan Lhe program's llmlL. 1hls pollcy should be reconsldered, as lL may no longer be
pracLlcal aL a Llme when Lhe sLaLe ls faclng fundlng challenges. AddlLlonally, lf Lhe sLaLe lncludes acLual
dollar amounLs belng recelved by such appllcanLs, Lhere ls a secondary beneflL. ln pracLlce,
acknowledglng chlld supporL as counLable lncome glves focus and valldlLy Lo chlld supporL as an
obllgaLlon of boLh parenLs. Such a pollcy may also have a chllllng effecL on Lhe appllcanLs presenLlng
Lhemselves as slngle-parenL household when, ln facL, Lhey may be llvlng wlLh Lhe oLher blologlcal parenL.

lL ls noL posslble Lo esLlmaLe how many famllles fall lnLo Lhls condlLlon. Powever, counLlng chlld-supporL
lncome may help conLaln Lhe overall number of cases LhaL are ellglble, and lL also honors Lhe prlnclple
LhaL boLh parenLs are responslble for Lhe chlldren. CLher sLaLes have adopLed Lhls pollcy wlLh a falr
degree of lmprovemenL ln program lnLegrlLy resulLlng from such a change.

Þroposa|
Change Lhe pollcy Lo lnclude chlld supporL when conslderlng famlly ellglblllLy ln Lhe chlld-care program.
1hls change would very llkely lmprove overall program lnLegrlLy.

Interagency Impact: none
Þrov|der]Commun|ty Impact: none
Iedera| Change Impact: none
1|metab|e: !anuary 1, 2014


79
29. 8ehav|ora| nea|th System Þayment keform
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($4,800,000) Lo ($7,300,000)
lederal lunds ($11,200,000) Lo ($17,300,000)
1oLal lunds ($16,000,000) Lo ($23,000,000)

Descr|pt|on
1he menLal-healLh componenL of Medlcald cosL Lhe sLaLe $460.3 mllllon ln l? 2012, approxlmaLely 10
percenL of Lhe LoLal. 1wo-Lhlrds of Lhe spendlng ls for rehablllLaLlve ouLpaLlenL servlces for persons wlLh
menLal lllness. 1hese servlces are fragmenLed across numerous provlders LhaL blll Lhe sLaLe for many
procedures wlLh llLLle coordlnaLlon. Many of Lhese cllenLs are also served Lhrough Lhe ulvlslon of
uevelopmenLal ulsablllLles (uuS) separaLely admlnlsLered by uevelopmenLal uay Cllnlc 1reaLmenL
Servlces (uu1CS) and Lhe Chlld PealLh ManagemenL Servlce (CPMS). All Lhese programs are hlgh-growLh
areas LhaL ofLen dupllcaLe Lheraples and program goals. Servlces for uu1CS LoLaled $133.2 mllllon. ln l?
2012, uuS reporLed LhaL 4 percenL of preschool Medlcald reclplenLs used boLh CPMS admlnlsLered by
Lhe ulvlslon of Medlcal Servlces and uu1CS. ln l? 2012, Medlcald pald cllnlcs more Lhan $200 mllllon
based on Lhe number of encounLers for speclallzed Lherapy servlces for chlldren less Lhan 3 years of age.

Arkansas Medlcald ls LranslLlonlng Lo an eplsode-based dellvery sysLem for all acuLe medlcal care buL
has noL yeL ouLllned a comprehenslve overhaul of all menLal-healLh paymenLs. under Lhls proposal, a
slngle accounLable agency wlll be responslble for Lhe full conLlnuum of behavloral-healLh servlces.
Savlngs are based on a 3-percenL reducLlon ln boLh menLal-healLh ouLpaLlenL servlces and uu1CS
currenLly bllllng Medlcald more Lhan $400 mllllon.

Þroposa|
• Make one accounLable organlzaLlon responslble for Lhe enhanced coordlnaLlon of behavloral
healLh care Lo ensure LhaL servlces provlded are medlcally necessary and ln approprlaLe seLLlngs.
• 8oll ouL wlll begln wlLh preschool chlldren.
• lee-for-servlce paymenLs wlll be converLed Lo bundled or per-person amounLs for all
hablllLaLlon servlces. uurlng Lhe LranslLlon phase, all uu1CS, CPMS, and menLal-healLh
ouLpaLlenL servlces wlll be llmlLed Lo slx hours per day.
• 1he accounLable agency wlll uLlllze one unlversal developmenLal assessmenL for hablllLaLlon
servlces.
• WlLh Lhe lmplemenLaLlon of Lhls program, Lhere ls also an expecLaLlon of cosL savlngs across
lnpaLlenL hosplLal seLLlngs, resldenLlal care, and emergency rooms (noL lncluded ln savlngs
esLlmaLe).
• 8ecommend a furLher dlscusslon regardlng occupaLlonal Lherapy, physlcal Lherapy, and speech
Lherapy, whlch wlll noL be lncluded ln lnlLlal converslon.

Interagency Impact: 8equlres ongolng dlscusslon beLween uuS and ulvlslon of 8ehavloral PealLh Servlces.
Þrov|der]Commun|ty Impact: SLakeholders should be lnvolved ln developmenL of assessmenL.
Iedera| Change Impact: SLaLe Þlan
1|metab|e: SofLware changes can be accompllshed by !anuary 1, 2014.

80
30. Med|ca|d for Þr|soners
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($3,300,000) Lo ($4,300,000)
lederal lunds $0 Lo $0
1oLal lunds ($3,300,000) Lo ($4,300,000)

Descr|pt|on
1he u.S. ueparLmenL of PealLh and Puman Servlces lnformed reglonal Medlcald dlrecLors ln 1997 LhaL
oLherwlse Medlcald-ellglble lnmaLes, who leave sLaLe or local faclllLles for aL leasL 24 hours Lo recelve
LreaLmenL ln local hosplLals or nurslng faclllLles, could parLlclpaLe ln Lhe federal Medlcald maLch. SLaLes,
such as Arkansas, LhaL are expandlng Medlcald under Lhe Affordable Care AcL wlll see correcLlonal
lnmaLes lmmedlaLely become newly ellglble for Medlcald. 1he newly ellglble Medlcald populaLlon would
be funded Lhrough a 100-percenL federal maLch Lhrough 2017 and lncremenLally movlng Lo a 90-percenL
maLch over Lhe nexL Lhree years.

norLh Carollna sLarLed Lhe relmbursemenL process ln 2011. ln May, Lhe sLaLe reporLed LhaL federal
paymenLs came Lo $10 mllllon ln Lhe flrsL year, a 4-percenL chunk ouL of Lhe sLaLe's $239 mllllon prlson
healLh-care blll. Cf Lhe 1,449 lnmaLes admlLLed Lo norLh Carollna hosplLals ln Lhe flscal year LhaL ends
!uly 1, almosL half were ellglble for Medlcald.

Þroposa|
1he Þew CenLer on Lhe SLaLes reporLed ln !une 2010 Lhe Arkansas prlson populaLlon was 13,171 and cosL
$349 mllllon, represenLlng 8 percenL of Lhe general fund wlLh and expecLed growLh of 43 percenL over
Lhe nexL Len years. ComparaLlvely, Lhe norLh Carollna prlson populaLlon was 40,379 ln 2010, based upon
Lhe ueparLmenL of CorrecLlons sLaLlsLlcs. 1he Arkansas cosL savlngs are esLlmaLed aL $3.3 Lo $4.3 mllllon
based upon norLh Carollna's experlence.
• ldenLlfy lnmaLes recelvlng healLh-care servlces ouLslde of Lhe correcLlonal faclllLy.
• LsLabllsh an appllcaLlon process Lo recelve Medlcald appllcaLlons for Lhe prlsoners
• CompleLe Lhe ellglblllLy deLermlnaLlon for a reLroacLlve or non-conLlnuous ellglblllLy perlod Lo
cover Lhe healLh-care servlces.
• CreaLe reporLs capLurlng prlsoner auLhorlzaLlons and expendlLures.
• CreaLe a process Lo pass Lhe sLaLe Medlcald cosLs onLo Lhe ueparLmenL of CorrecLlons.
• ueflne long-Lerm buslness process lmprovemenLs Lo mlLlgaLe operaLlonal lmpacLs.

Interagency Impact: AgreemenLs wlll need Lo be esLabllshed wlLh sLaLe and local correcLlonal organlzaLlons.
Þrov|der]Commun|ty Impact: Þrovlders would recelve Medlcald relmbursemenL raLes.
Iedera| Change Impact: none
1|metab|e: 1he process can begln !anuary 2014.


81


Append|x 8: ADDI1ICNAL kLCCMMLNDA1ICNS

82
31. Þr|vate Market nea|th-Care 1rans|t|on
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($13,000,000) Lo ($20,000,000)
lederal lunds ($283,000,000) Lo ($380,000,000)
1oLal lunds ($300,000,000) Lo ($400,000,000)

Descr|pt|on
PealLh-lnsurance cosLs are escalaLlng aL a sLaLe and federal level LhaL are noL susLalnable. 1he Affordable
Care AcL ls expecLed Lo lncrease Lhe adulL Arkansas Medlcald-populaLlon by 219,233 people. 1he
addlLlonal long-Lerm cosL of Lhe currenL and new Medlcald populaLlon basellne ls noL susLalnable. 1he
exlsLlng Medlcald sysLem, whlch ls lnLended Lo serve as a safeLy neL for our mosL vulnerable clLlzens,
places an exLreme and lncreaslng burden on Arkansas Laxpayers. WlLhouL changlng Lhe Medlcald
paradlgm of healLh-care coverage, healLh-care cosLs would follow Lhe same Lra[ecLory, [usL aL a lower
level and merely delay Lhe lnevlLable, unsusLalnable resulL. uellverlng a beneflL wlLhouL addresslng Lhe
barrlers wlll noL succeed.

Þroposa|
lL ls lmporLanL Lo redeslgn and slmpllfy beneflL packages wlLh Lhe flexlblllLy Lo offer baslc beneflL
packages LhaL allgn wlLh Lhe core needs of consumers wlLh addlLlonal opLlons Lhrough a cosL-sharlng
componenL wlll meeL Lhe needs ln a susLalnable manner. 1he flexlblllLy Lo enroll consumers ln free
markeL healLh-care plans enables Arkansas Lo serve more lndlvlduals and promoLe personal
responslblllLy and lndependence.

1he SocleLy of AcLuarles' March 2013 reporL, º1he CosL of Lhe luLure newly lnsured under Lhe
Affordable Care AcL (ACA)," esLlmaLes a monLhly cosL for healLh-care coverage of $419 ln 2014. 1he
currenL monLhly cosL for Lhe prlvaLe-secLor Arkansas 8lue Cross 8lue Shleld ÞÞC lll wlLh a $1000
deducLlble ls $132.42. 1he LoLal cosL reducLlon ls esLlmaLed aL $433,837,007 ln Lhe flrsL year wlLh Lhe
sLaLe porLlon aL $21,629,830. 1he proposal lncludes fundlng a $1,000 deducLlble Lhrough a healLh-
savlngs accounL (PSA). A beneflL-cosL analysls provldes a neL presenL value of $339 mllllon ln sLaLe funds
over a Len-year perlod conslderlng $100 mllllon Lo bulld Lhe sysLem. 1he plan provldes a beneflL-cosL
raLlo of 2.33, an 8Cl of 133 percenL, and a payback perlod of 3.68 years.

• SLreamllne baslc beneflL packages for Medlcald reclplenLs.
• uevelop a self-screenlng process Lo ldenLlfy hlgh- or low-healLh rlsk lndlvlduals.
• LsLabllsh prlvaLe markeL healLh-care packages LhaL lnclude prevenLaLlve and prlmary care,
hosplLallzaLlons, and opLlonal coverage Lo address oLher needs.
• CreaLe a healLh-savlngs accounL Lo cover co-pays and deducLlbles.

Interagency Impact: Þollcy, regulaLory, and conLracLual changes wlll be necessary.
Þrov|der]Commun|ty Impact: Þrovlders and lnsurers would compeLe for buslness.
Iedera| Change Impact: CMS approval would be requlred.
1|metab|e: 1he process can begln !uly 2014.

83
32. State Lmp|oyee nea|th Þ|an
Lst|mated kange of Annua| Spend|ng](Sav|ngs)
SLaLe lunds ($31,843,000) Lo ($43,081,000)
lederal lunds ($4,342,000) Lo ($3,873,000)
1oLal lunds ($36,183,000) Lo ($48,936,000)

Descr|pt|on
1he SLaLe Lmployee PealLh 8eneflL Þlan ls LradlLlonal healLh plan offered Lhrough 8lue Cross/8lue Shleld
of Arkansas. 1o lncrease lLs purchaslng power, Lhe sLaLe plan ls also avallable Lo publlc-school Leachers
and employees. 1he plan offers Lhree beneflL levels lncludlng Cold, Sllver and 8ronze, wlLh Lhe greaLesL
employee conLrlbuLlon comlng ouL of Lhe ºgold" level. 1oLal expendlLures for Lhe plan were
approxlmaLely $373 mllllon for calendar year 2012. Clalm expenses by employees have been growlng an
average raLe of abouL 6 percenL per year.

1he cosL of managed care ls lncreaslng because of Lhe relaLlonshlp beLween Lhe hosplLals and Þreferred
Þrovlder CrganlzaLlons (ÞÞC). CurrenL bllllng pracLlces beLween hosplLals and managed-care
organlzaLlons (MCC) are complex, hldden, and unaccounLable. WlLhln Lhe sysLem, a mulLl-bllllon dollar
lndusLry has been creaLed called where hosplLals employ ouLslde conLracLors Lo help maxlmlze bllllng.
1he ulLlmaLe cosL ls passed on Lhe organlzaLlons LhaL pay for Lhe clalms: lndlvlduals, companles,
munlclpallLles, and sLaLe agencles.

AC's modellng shows slgnlflcanL savlngs ln movlng Lo a plan whereby organlzaLlons purchase healLh-care
servlces, based on Lransparency, clearly undersLood Lerms and condlLlons, and where a clear
relaLlonshlp beLween cosL and prlce exlsLs.

1here ls a false percepLlon LhaL hosplLals are elLher noL maklng a proflL or breaklng even. 1he daLa
avallable from Lhe CenLers for Medlcare and Medlcald Servlces (CMS) presenLs a dlfferenL plcLure. 1he
Lable below provldes a sample of average neL proflLs for Arkansas hosplLals.


Þroposa|
• CreaLe a LransparenL, healLh-care plan for sLaLe and publlc school employees.
• ConnecL payer Lo provlder(s) uslng an admlnlsLraLor LhaL wlll pay for approprlaLe level of care
wlLhouL lnconvenlenclng employees or asklng for lncreased premlums. 1he sLaLe can modlfy lLs
plan language Lo purchase cerLaln medlcal producLs aL a reasonable margln (boLLom-up) raLher
Lhan a percenLage-off bllled charges (Lop-down).
!"#$%$&' ()#"&$)* +,& ./)0$&
Arkansas Chlldren's PosplLal LlLLle 8ock, A8 $33,364,420
8abLlsL Medlcal CenLer LlLLle 8ock, A8 $16,430,648
SL. 8ernards Medlcal CenLer !onesboro, A8 $9,239,227
Þlney 8ldge CenLer layeLLevllle, A8 $2,366,309
WhlLe CounLy Medlcal CenLer norLh Searcy, A8 $12,962,603
WashlngLon 8eglonal PosplLal layeLLevllle, A8 $10,230,236
12,/"3, +,& ./)0$& 0/)4 5667 &) 5688

84
• Move away from bllled charges LhaL are based on closed negoLlaLlons Lo a LransparenL and
raLlonal model.
• Analyze pharmacy daLa. naLlonally, pharmacy clalms ln 2011 were $263 bllllon and represenL a
slgnlflcanL cosL Lo all plan sponsors. A pharmacy cosL and uLlllzaLlon audlL wlll provlde
lnformaLlon boLh Lo Lhe prescrlber and Lhe paLlenL aL Lhe polnL of declslon. A compeLlLlve
process could Lhen be creaLed, whlch drlves cosL down for paLlenLs and plan sponsors.

AC's payer-Lo-provlder modellng ln oLher locallLles has found average savlngs of $240,000 for every 100
employees. 1o err on Lhe conservaLlve slde, we reduced Lhe poLenLlal savlngs by 30 percenL and applled
Lhe sLandard 13-percenL varlance. We based Lhe esLlmaLe on 93,880 employees and reLlrees currenLly
on Lhe sLaLe-employee healLh-care plan. SLaLe conLrlbuLlons accounL for 37 percenL of all conLrlbuLlon Lo
Lhe sysLem. 8ecause federal funds parLlally pay for personnel expenses, Lhe LoLal savlngs ln sLaLe
conLrlbuLlons wlll spllL beLween federal and sLaLe funds. We were unable Lo obLaln daLa on Lhe exacL
spllL buL esLlmaLe LhaL 12 percenL of Lhe savlngs wlll be for Lhe federal governmenL wlLh Lhe remalnlng
88 percenL for Lhe SLaLe of Arkansas.

ln addlLlon Lo Lhe sLaLe beneflLlng, school dlsLrlcLs and employees wlll also beneflL because Lhelr healLh-
care conLrlbuLlon wlll be reduced aL esLlmaLed $18,409,000 for Lhe dlsLrlcLs and $43,721,000 for
employees.

Interagency Impact: none
Þrov|der]Commun|ty Impact: PosplLals wlll llkely provlde reslsLance!
Iedera| Change Impact: none
1|metab|e: lnlLlaLlves can be lmplemenLed beglnnlng !uly 1, 2013.


83


LIS1 CI ACk¥CN¥MS

AAÞu AlLernaLlves for AdulLs wlLh Þhyslcal ulsablllLles
ACA ÞaLlenL ÞroLecLlon and Affordable Care AcL, commonly known as CbamaCare
ACl u.S. AdmlnlsLraLlon on Chlldren and lamllles
ACS Amerlcan CommunlLy Survey of Lhe u.S. Census 8ureau
ACS AlLernaLlve CommunlLy Servlces
AluC Ald Lo lamllles wlLh uependenL Chlldren program, Lhe precursor Lo 1Anl
AlMC Arkansas loundaLlon for Medlcal Care
AnSWL8 Arkansas neLworked SysLem for Welfare LllglblllLy and 8eporLlng
AoA u.S. AdmlnlsLraLlon on Aglng
A88A Amerlcan 8ecovery and 8elnvesLmenL AcL of 2009
8LS u.S. 8ureau of Labor SLaLlsLlcs
CCul Chlld Care uevelopmenL lund
CPMS Chlld PealLh ManagemenL Servlces
CMS u.S. CenLer on Medlcare and Medlcald Servlces
uAAS ulvlslon of Aglng and AdulL Servlces, Arkansas ueparLmenL of Puman Servlces
u8PS ulvlslon of 8ehavloral PealLh Servlces, Arkansas ueparLmenL of Puman Servlces
uCCLCL ulvlslon of Chlld Care & Larly Chlldhood LducaLlon, Arkansas ueparLmenL of
Puman Servlces
uClS ulvlslon of Chlldren & lamlly Servlces, Arkansas ueparLmenL of Puman Servlces
uCC ulvlslon of CounLy CperaLlons, Arkansas ueparLmenL of Puman Servlces
uCSnS ulvlslon of CommunlLy Servlce and nonproflL SupporL, Arkansas ueparLmenL of
Puman Servlces
uu uevelopmenLal ulsablllLles, also lu.
uuuS ulvlslon uevelopmenLal ulsablllLles Servlces, Arkansas ueparLmenL of Puman
Servlces
uu1CS uevelopmenLal uay Cllnlc 1reaLmenL Servlces
ulA Arkansas ueparLmenL of llnance and AdmlnlsLraLlon
uPS Arkansas ueparLmenL of Puman Servlces
uPS u.S. ueparLmenL of Pomeland SecurlLy
uLA Arkansas ulvlslon of LeglslaLlve AudlL
uML uurable Medlcal LqulpmenL
uMS ulvlslon of Medlcal Servlces, Arkansas ueparLmenL of Puman Servlces
uCA u.S ueparLmenL of AgrlculLure
uCL u.S. ueparLmenL of Lnergy
uCP Arkansas ueparLmenL of PealLh

86
uC! u.S. ueparLmenL of !usLlce
uC1 u.S. ueparLmenL of 1ransporLaLlon
u8C ulagnosls-8elaLed Croup
L81 LlecLronlc 8eneflL 1ransfer
Lu Lmergency ueparLmenL or Lmergency 8oom aL a hosplLal
LSl Lmployer-Sponsored lnsurance
LSS LxLended SupporL Servlces
l8l u.S. lederal 8ureau of lnvesLlgaLlon
llS lee for Servlce
lMAÞ lederal Medlcal AsslsLance ÞercenLage
lnS u.S. lood and nuLrlLlon Servlces
PC8S Pome and CommunlLy 8ased Servlces
PLAÞ Pome Lnergy AsslsLance Þrogram
PPS u.S. ueparLmenL of PealLh and Puman Servlces
PÞ PewleLL Þackard
P8SA u.S. PealLh 8esources and Servlces AdmlnlsLraLlon
PSAC PealLh Servlces Advlsory Croup
Puu u.S. ueparLmenL of Pouslng and urban uevelopmenL
lCL u.S. lmmlgraLlon and CusLoms LnforcemenL
lCl lnLermedlaLe Care laclllLles
!C8S 1he federal !ob CpporLunlLles and 8aslc Skllls Lralnlng program
MCC Managed Care CrganlzaLlons
MLCC Medlcald LllglblllLy CuallLy ConLrol
MMlS Medlcald ManagemenL lnformaLlon SysLems
MCL MalnLenance of LfforL
nAS8C naLlonal AssoclaLlon of SLaLe 8udgeL Cfflcers
nPCAA naLlonal PealLh Care AnLl-lraud AssoclaLlon
ClA u.S. Cfflce of lamlly AsslsLance
ClC u.S. Cfflce of lnspecLor Ceneral
CMv Cfflce of MoLor vehlcles, Arkansas ueparLmenL of llnance and AdmlnlsLraLlon
CCA 1he Cfflce of CuallLy Assurance, Arkansas ueparLmenL of Puman Servlces
CSLÞ u.S. Cfflce of Speclal LducaLlon Þrograms
ÞA8lS Þubllc AsslsLance 8eporLlng lnformaLlon SysLem
ÞuL Þreferred urug LlsL
ÞL8M ÞaymenL Lrror 8aLe MeasuremenL
Þlu Þrogram lnLegrlLy unlL. Arkansas ueparLmenL of Puman Servlces
ÞCS ÞolnL of Servlce
ÞÞC Þreferred Þrovlder CrganlzaLlons

87
Þ8WC8A Þersonal 8esponslblllLy and Work CpporLunlLy 8econclllaLlon AcL of 1996.
8n 8eglsLered nurse
SAMPSA u.S. SubsLance Abuse and MenLal PealLh Servlces AdmlnlsLraLlon
SnAÞ SupplemenLal nuLrlLlon AsslsLance Þrogram, more commonly known as lood
SLamps.
SSA u.S. Soclal SecurlLy AdmlnlsLraLlon
SSl 1he federal SupplemenLal SecurlLy lncome program
1Anl 1emporary AsslsLance for needy lamllles, federal program creaLed by Lhe
Þersonal 8esponslblllLy and Work CpporLunlLy 8econclllaLlon AcL (Þ8WC8A) of
1996.
1LA 1ranslLlonal LmploymenL AsslsLance Þrogram
1Ll8A 1ax LqulLy llscal 8esponslblllLy AcL
1ÞL 1hlrd ÞarLy LlablllLy
vA u.S. veLeran Affalrs AdmlnlsLraLlon
WAÞ WeaLherlzaLlon AsslsLance Þrogram
WlC Women lnfanL Chlldren program
WÞ8 Work ÞarLlclpaLlon 8aLe



88





















1he A|exander Group, LLC (AG) ls a governmenL and buslness consulLlng flrm LhaL dellvers cuLLlng-edge
daLa-drlven soluLlons, sLraLeglc buslness developmenL, and lnnovaLlve healLh-care and Lechnology
plaLforms-Lo lmprove efflclency, effecLlveness, and quallLy for our cllenLs. AC possesses unlque
experLlse ln Lhe governmenL healLh-care markeLplace, bullL upon Lwo decades of operaLlng large-scale
healLh and human servlces agencles and ploneerlng lnnovaLlve reforms LhaL saved sLaLe bllllons of
dollars and lmproved servlce quallLy. lounded ln 2013 by reformer Cary u. Alexander, Lhe flrm ls Lhe
only group of publlc offlclals who have deslgned, lmplemenLed, and managed naLlonally acclalmed
reforms llke Lhe >3#9( !-+%"9 0+#;%+ ?(9'5%'9 @%'$(/ and, ln Þennsylvanla, 23( 6"&(/8/'-(A@'9(
=/#</%1 !"&(</'&7 =+%" and 23( B(%+&3 %"9 B,1%" *(/$'5(- 4#,"&7 :+#5C 0/%"&!

WlLh speclalLles ln Medlcald, Medlcare, long-Lerm care, and soclal welfare programs, AC provldes cllenLs
clarlLy aL Lhe lnLersecLlon of buslness and publlc pollcy whlle ldenLlfylng opporLunlLles LhaL enhance Lhe
boLLom-llne and lmprove Lhe llves of peopleD 8aLher Lhan remedlaLe complex and ouLdaLed asslsLance
programs plecemeal, we help sLaLes reform and resLrucLure Lhelr enLlre publlc-welfare sysLems.
ueploylng cosL-effecLlve savlngs meLhodologles Lo ensure a value-, LransparenL-, and efflclency-
based sysLem, our reforms drlve lnnovaLlon, lmprove servlce quallLy and performance, lncenLlvlze
accounLablllLy, modernlze operaLlons, and rooL ouL fraud, wasLe, and abuse.



4/(%&'"< %"9 E(+'$(/'"< !""#$%&'$( 0+#;%+ *#+,&'#"-


! Þrov|dence, k.I. ! Þh||ade|ph|a, Þa. ! Wash|ngton, D.C.

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