Health Care

Policymakers Must Reform, Not Expand, Medicaid

November 13, 2014

Jonathan Small

According to health-care researchers Avik Roy and Grace-Marie Turner, Medicaid “has the worst health outcomes of any insurance program in the developed world.”

So why do Oklahoma policymakers keep expanding it?

It’s time to take a careful look at this medical welfare program—a program which is rapidly crowding out other items in the state budget.

According to the state’s fiscal year (FY) 2013 Comprehensive Annual Financial Report, total state spending on health services has grown from $3.14 billion in FY-2005 to $5.44 billion in FY-2013. That’s an increase of 72.9 percent in eight years.

According to the FY-2000, FY-2010, and FY-2013 annual reports from the Oklahoma Health Care Authority (OHCA):

• A record 1,040,332 people—that’s 27 percent of the population—were enrolled in Medicaid in FY-2013, despite the state having one of the nation’s lowest unemployment rates, a growing GDP, and growing per capita income.
• The number of children enrolled in Medicaid has increased more than 197 percent since 1997.
• In FY-2003 there were 498,031 Medicaid enrollees (14.27 percent of the population) and total (state) Medicaid expenditures of $714.9 million. By FY-2013, the number of Medicaid enrollees had ballooned to 1,040,332 (27 percent of the state’s population) and state expenditures had skyrocketed to $1.9 billion. That’s an increase of 172.71 percent in just 10 years. Inflation over this period was just 28 percent. Total population growth in Oklahoma over that same period was just 9.3 percent.
• The unemployment rate for Oklahoma only moderately increased over this period. It was 4.7 percent in 2002, ranking 12th out of the 50 states, and in 2012 it was 5.2 percent, ranking 5th out of the 50 states.
• Approximately 63 percent of births in Oklahoma are covered by Medicaid.
• Approximately 72 percent of all Oklahoma children under the age of five were covered by Medicaid at some point during FY-2012.
• In Oklahoma, Medicaid historically was geared for the aged, blind, and disabled, yet now this population only comprises 16.1 percent of enrollees and just 46.5 percent of the cost in Oklahoma.
• As of FY-2013, of Oklahoma’s 77 counties, 39 counties have 30 percent or more of their population enrolled in Medicaid. Four counties have more than 40 percent of their population on Medicaid.

In an article published March 1, 2013, journalist Peter J. Rudy found that the state Medicaid program in Oklahoma has increased in costs and in number of people served for every year of the last 16 years. “The number of individuals served has never decreased—no matter what the state’s economic condition is—more than doubling in that same period,” Rudy reported.

The rate at which the federal government matches Oklahoma state funds on Medicaid is decreasing significantly, going from a 70.18 percent federal match several years ago all the way down to a 62.30 percent match in FY-2015.
The problem is not that there is too little money for Medicaid; the problem is there are too many people on Medicaid. The program has been expanded too far, and enrollees are driving program expenditures beyond sustainable limits.
What then shall Oklahoma policymakers do?

Don’t Expand Medicaid

Special interests in Oklahoma who receive billions of dollars from Medicaid have peddled the notion that expanding Medicaid reduces emergency room use. But this is not true.

According to the OHCA, 289,119 Medicaid enrollees (approximately 28 percent of total Medicaid enrollees) visited the emergency room 548,136 times during FY-2013. The cost to taxpayers for these visits was $178 million.

This use of emergency rooms by Medicaid patients is not new. According to the OHCA, during FY-2012, 259,030 Medicaid enrollees (approximately 25 percent of total Medicaid enrollees) visited the emergency room 528,264 times. The cost to taxpayers for these visits was $169 million in FY-2012.

Medicaid enrollees actually use the emergency room more than other populations. A study conducted by Amy Finkelstein, a Massachusetts Institute of Technology economist, showed that Oregon’s attempt to expand Medicaid to adults resulted in those new Medicaid enrollees using the emergency room 40 percent more than those without health insurance.

This is not surprising, considering that most Medicaid programs do not have robust emergency room diversion programs and the federal government makes it very difficult to encourage co-payments in the Medicaid program, thus making health care services in the Medicaid program virtually free to the recipient. According to the OHCA, they have no emergency room diversion program, and do not have incentivized staff present in emergency rooms to assist Medicaid patients in making better and less costly choices for treatment.

Enact Medicaid Reforms

It’s not enough simply to oppose the expansion of Medicaid. Policymakers must provide solutions to make Medicaid better.

Oklahoma’s political leaders should take advantage of all currently available options to significantly improve Medicaid by implementing the best Medicaid reforms pursued by Florida, Louisiana, Kansas, and other states looking to make Medicaid serve patients first and empower patients toward self-sufficiency.

The Foundation for Government Accountability in Florida has provided extensive research regarding Florida’s success with its Medicaid reform and the cumulative hundreds of millions of dollars it has saved the state of Florida. Louisiana is pursuing similar reforms. In the first year, Louisiana had experienced savings exceeding $135 million from implementing Medicaid reform, only about half-way through the fiscal year. Fundamentally, the reforms refocus Medicaid programs on the patient, and incentivize care coordination, health improvement, patient empowerment, and taxpayer savings.

Jonathan Small, C.P.A., serves as OCPA’s executive vice president. Previously, he served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. He holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.

Another Much-Needed Reform: Give State Employees, Teachers More Choices

As journalist Patrick McGuigan reported in these pages in April and again in July, free-market medicine is saving taxpayers big bucks in Oklahoma County. Now it’s time for state policymakers to apply the same reforms to their government employees’ health plans as those implemented by Oklahoma County regarding the purchase of surgical procedures.

This will save taxpayers and state employees real money.

Oklahoma County Commissioners enacted a provider services agreement between the Surgery Center of Oklahoma and Oklahoma County that established the Surgery Center as an optional benefit for covered employees, retirees, and eligible dependents. Within the first five months, the county saved more than $500,000, and county employees saved more than $270,000 in deductible costs.

Implementing these reforms for the State of Oklahoma would offer a positive expansion of flexibility in options—options that can save the state up to $20 million annually.

-Editor