Budget & Tax , Health Care

Jonathan Small | December 11, 2017

TSET reforms, Medicaid audits will help the most vulnerable

Jonathan Small

By Jonathan Small

Former Gov. Frank Keating and Oklahoma City physician Doug Beall—both OCPA trustees—recently entered the national health care debate with a column in The Wall Street Journal.

Their thesis? Medicaid must be dramatically reformed if we are to avoid bankruptcy for the states and return the program to its original goal of helping the most vulnerable.

Keating and Beall cite some frightening statistics. Even after Oklahoma wisely opted out of the Medicaid expansion included in Obamacare, our share of the costs has reached $2.1 billion annually, an astounding 194 percent increase from the $714 million we spent as recently as 2003. Yet, in those years, per capita incomes in Oklahoma rose by 71 percent.

They also noted that almost one in four Oklahomans are now enrolled in Medicaid. The program covers 57 percent of all childbirths. Nearly three-fourths of all Oklahoma children will be covered by Medicaid at some point between birth and kindergarten.

It doesn’t take an actuarial expert to project a future when Medicaid consumes an increasingly disastrous portion of our state budget, crowding out other needs like schools and roads.

Yet the Medicaid expansion sold under Obamacare, which would have raised eligibility to thousands of able-bodied adults if Oklahoma had gone along, would have only made these problems worse, further hurting the very people Medicaid was supposed to assist.

Nor is Medicaid a bargain for those it covers. Due to exploding enrollment burdening our system, reimbursement rates have steadily declined, resulting in one in three doctors declining to accept Medicaid patients. This results in more Medicaid clients going to emergency rooms or avoiding medical care altogether, precisely what the program was meant to prevent.

So what is to be done? Keating and Beall suggested block grants and giving Medicaid clients greater responsibility for their health outcomes through health savings accounts that let them set aside funds for many medical expenses. They could also enroll in less costly direct primary care programs.

Another idea: tobacco settlement reforms. OCPA suggested earlier this year that all future payments to the Tobacco Settlement Endowment Trust (TSET) from the Master Settlement Agreement be directed to a rural healthcare infrastructure fund. This fund would be used for the cost of health care reimbursement to rural areas that struggle with revenue stream diversity for their hospitals and have suffered actual dollar losses. The fund would also be used to fund the Physician Manpower Training Commission and shore up nursing home provider rates.

Finally, it remains vital that states impose rigorous audits of Medicaid rolls to prevent abuse. Such audits simply identify those receiving benefits for which they are ineligible. Earlier this year, OCPA estimated that audits would save Oklahoma $85.6 million annually.

A quick look at the experiences of other states proves this is a reform worth implementing.

When Illinois strengthened its Medicaid eligibility auditing procedures, a random check of recipient files found 34 percent contained errors. Those new auditing requirements detected some 600,000 people who were on the Medicaid rolls but were found to be ineligible. Annual savings? As high as $430 million.

Pennsylvania implemented more stringent audits of Medicaid eligibility. They found 220,000 people receiving benefits they did not deserve.

As with most forms of public assistance, eligibility for Medicaid is based largely on self-reported data such as income and household size. And with one in four Oklahomans receiving some form of benefits through Medicaid, it’s only responsible to make sure everyone is actually eligible. More rigorous audits will help detect misuse and save taxpayer dollars. Legislation considered this year adds the process of quarterly audits and requirements to confirm information with several databases to ensure maintained eligibility.

What motivates Medicaid fraud by some recipients? Some legitimate recipients might “share” their Medicaid card with someone else. Others may be drug addicts who use Medicaid to doctor shop for prescriptions. Others are simply taking advantage of the taxpayers to present bogus information to get on the Medicaid rolls.

The best way to help the truly vulnerable is to have a Medicaid system that is stable and free from abuse. Lawmakers should focus their efforts on improving the program for those it was meant to serve.

This is not about removing deserving recipients from Medicaid. It would only target ineligible use of the system, just as state authorities try to root out and prosecute health care providers who submit phony claims.

In sum, Medicaid was created in 1965 as a means to assist the most vulnerable among us. It was never intended to bankrupt state or federal budgets or to be a back-door, single-payer system for an ever-expanding client base. As Keating and Beall suggest, if you are driving a rusty 1965 car that requires endless costly repairs, it’s time for a new model.

Jonathan Small is the president of the Oklahoma Council of Public Affairs. A Certified Public Accountant, he previously 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. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden.

Jonathan Small President

Jonathan Small


Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan 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. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.

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