Health Care

Kaitlyn Finley | May 6, 2019

Medicaid expansion: Arkansas’ costly mistake

Kaitlyn Finley

This legislative session, some Oklahoma lawmakers have proposed expanding Medicaid under Obamacare. One such measure is Senate Bill 605.

SB 605 would expand medical entitlement benefits to a potential 628,000 able-bodied, working-age adults in Oklahoma. This bill, which supporters call the “Oklahoma Plan,” has been touted as a “conservative” alternative to traditional  Medicaid expansion because it would request a federal waiver to operate the welfare program differently than in some other states.

Unfortunately, this type of “conservative” welfare expansion has failed in other states and left them with a financial mess. Take Arkansas, for example.

In 2013, the Arkansas legislature passed a plan similar to the one proposed in SB 605.  The “Arkansas Plan” gave new expansion enrollees Medicaid benefits through private Qualified Health Plans (QHP) sold on the Obamacare Exchange.

After administering the program for three years, the state commissioned an interim analysis to evaluate the fiscal costs of the Arkansas Plan. The analysis found that the Arkansas Plan cost nearly twice as much as if the state had just adopted ordinary Obamacare Medicaid expansion.

“Physician payment rates across outpatient services were approximately 95 percent higher in each of the three years under study for enrollees in a QHP compared to their Medicaid counterparts,” the report states. The analysis also finds that administrative costs were nearly 30 percent higher for expansion enrollees in a QHP over those on Medicaid in Arkansas.

Poor projections and higher physician and administrative costs resulted in $1.4 billion in cost overruns for the program.

While Arkansas’ disastrous plan unfolded, other states like Iowa and New Hampshire decided to scrap their alternative expansion plans in 2015 and 2018, respectively.

If Oklahoma lawmakers ignore these case studies and implement SB 605, Oklahoma taxpayers could be on the hook for $374 million in new state costs, based on the number of eligible enrollees and average per-person costs. The state of Oklahoma does not have the financial bandwidth to expand entitlements to hundreds of thousands of able-bodied, working-age adults at a cost of hundreds of millions of dollars. Oklahoma should take note of other states’ mistakes and reject any form of Medicaid expansion—not willingly follow them off a financial cliff.

Kaitlyn Finley Policy Research Fellow

Kaitlyn Finley

Policy Research Fellow

Kaitlyn Finley currently serves as a policy research fellow for OCPA with a focus on healthcare and welfare policy. Kaitlyn graduated from the University of Science and Arts of Oklahoma in 2018 with a Bachelor of Arts in Political Science. Previously, she served as a summer intern at OCPA and spent time in Washington D.C. interning for the Heritage Foundation and the U.S. Senate Committee on Environment and Public Works.

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