Oklahoma Considers Medicaid Alternatives

Published April 23, 2013

Oklahoma Gov. Mary Fallin remains determined to avoid entanglement in President Obama’s health care law. But in the Oklahoma legislature, a proactive reform measure to trim Medicaid expenses may not make it to the Senate floor.

Early in her tenure, Fallin, a Republican, flirted with Medicaid expansion, as well as the creation of a state-run online health insurance exchange and other aspects of President Obama’s law. But in the face of rising opposition within the legislature, Fallin said Oklahoma would neither create an exchange nor implement the Medicaid expansion.

Pressure on Fallin to reverse herself and embrace the federal law has come relentlessly from members of the Oklahoma Hospital Association. In an op-ed piece for the state’s largest newspaper, The Oklahoman, seven OHA executives argued, “devising an Oklahoma plan that uses expansion money” would allow the state to “recapture federal tax dollars and use them to control the cost of health care and enhance the access to and the quality of care. The funding to cover the additional 17 million uninsured people nationwide and 180,000 in Oklahoma has already been allotted. The allotment is drawn from the federal taxes Oklahomans pay. In short, it is Oklahoma taxpayer money.”

However, the troubled economics of Medicaid—including the virtual certainty that costs will increase—have bolstered Fallin’s stance in opposition to expansion.

Considering Alternate Approaches

An effort to build an alternative reform with a more pro-market orientation, patterned on steps already taken in Florida and Louisiana, has been foundering in the Oklahoma legislature.

Jonathan Small, fiscal policy director of the Oklahoma Council of Public Affairs, a free-market think tank, said Medicaid’s built-in growth could lead to it taking up around 50 percent of the money projected to be available for spending from all sources, including the federal government, by 2017.

In the state budget, the legislature approved $80 million for “maintenance of effort” in Medicaid in FY 2013. A third of that was pulled from the Insure Oklahoma fund, an insurance program for the state’s working poor.

Small and others criticized taking Insure Oklahoma resources, saying the homegrown program is a model to build on rather than something to erode to meet federal dictates. Small points out the state’s Medicaid spending challenges are historic and intensifying, noting that merely to “run in place” this year may require $40 million to $60 million in new spending. In fiscal year 2000, 416,785 Oklahomans were enrolled in Medicaid, at a cost of $1.14 billion. By fiscal year 2012, there were 1,007,356 enrollees—26.57 percent of the entire population. Oklahoma’s program costs increased 190.9 percent in 12 years, reaching $4.77 billion, with the state’s share about $1.3 billion.

Medicaid Expansion and ER Usage

Small is not alone in presenting doomsday scenarios about Medicaid expansion. The Oklahoma State Medical Association said the addition of 200,000 people to Medicaid rolls in 2014 would crater any ability to care for patients, poor or otherwise, in a sustainable way.

In 2010, health care costs became the top cost driver in the Oklahoma state budget, surpassing the traditional top item, K-12 public education. A key component of this was the increase in costs associated with Medicaid recipients making use of emergency rooms.

According to the Oklahoma Health Care Authority, total taxpayer costs for Medicaid rose 190 percent from 2000 to 2012. Virtually every aspect of Medicaid coverage has helped push costs to the taxpayer higher.

For example, with more than one-fourth of the state’s residents now covered by Medicaid, emergency room costs for Oklahoma’s Medicaid recipients reached nearly $170 million in fiscal year 2012.

The Oklahoma Health Care Authority says of the more than one million Oklahomans enrolled in Medicaid programs in fiscal year 2012, 250,030 utilized emergency room services.

Louisiana and Florida Models

Louisiana and Florida have implemented a mix of reforms sometimes dubbed the “Medicaid Cure,” drawn from a pilot program launched in 2006. Louisiana’s reforms have taken effect statewide. Florida is debating moving beyond the regional pilot.

The managed-care programs in those states, focused on eligible populations, are the basis for House Bill 1552 in the Oklahoma legislature. Insurance programs within the system would include long-term care, allowing some distinctions between urban and rural care systems.

The Louisiana-Florida reforms include a focus on better coordinating health care of those utilizing Medicaid assistance, by contracting with for-profit and nonprofit plans.

That approach, Small said, allows administrators “to better predict costs and reward patient and provider usage that results in better health. This is a paradigm shift from the traditional fee-for-service model of Medicaid, where the primary focus is predominantly quick payment for providers, arbitrary pilot programs that are not tied to incentivizing better behavior, and expanding Medicaid.

“Louisiana will see savings exceeding $135 million in its first year alone,” Small added.

A bill proposing reform along these lines, House Bill 1552, has been pressed by state Rep. Mark McCullough, R-Broken Arrow, and state Sen. A. J. Griffin, R-Guthrie. On the House side the measure was approved March 12 on a 64-21 vote. The Senate Health and Human Services Committee has yet to hear the Senate version of the bill.

Patrick B. McGuigan ([email protected]) writes for OklahomaWatchdog.org, where an earlier version of this article appeared.