| April 4, 2013

Oklahoma Growing Increasingly Dependent on Medicaid

There is currently a debate raging in state capitals across the country as policymakers dispute the merits of expanding Medicaid under the provisions of the Affordable Care Act (Obamacare).

At first glance, expanding Oklahoma’s Medicaid program looks like free money since Uncle Sam will pick up the entire tab for the first three years. Who doesn’t like free money?

In reality, Oklahoma has already been growing increasingly dependent on Medicaid. Listening to Obamacare’s siren call to expand Medicaid will only serve to deepen Oklahoma’s dependency. In fact, according to a recent study by the Henry J. Kaiser Family Foundation, such an expansion would add 235,000 Oklahomans to the Medicaid rolls—an 86.7 percent increase!

Chart 1 illustrates the growth differentials between Medicaid spending and personal income. Since Medicaid is counted in personal income, comparing their respective growth rates exposes whether or not Oklahomans are becoming more or less dependent on Medicaid.

The comparative growth indices shown in Chart 1 were created by setting the base year (1969) equal to one and then multiplying each successive year by the growth rate. This makes it easier to visualize the relative growth differentials without worrying about the differences in starting values. The data are for calendar years (CY) 1969 to 2011 [the latest year of data available from the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA)]. Comparative Growth Indices

Between 1969 and 1981, Medicaid spending and personal income grew at the same rate. However, after 1981 the growth in Medicaid spending began to outstrip personal income, and by 1999 the growth index value (20.28) was more than twice the index value for personal income (9.63).

Between 1999 and 2001, Medicaid spending soared with growth rates of 12.73 percent (1999), 14.01 percent (2000), and a whopping 25.03 percent (2001). While the growth in Medicaid has moderated since 2001, it is still growing at a rate significantly faster than personal income. By 2011, the Medicaid growth index (55.45) is more than three times the index value for personal income (17.59).

Another way to look at the growth in Medicaid versus personal income is to compare the compounded annual growth rate (CAGR). Between 1969 and 2011, the CAGR of Medicaid spending was 42 percent faster than for personal income—10.03 percent versus 7.07 percent, respectively.

However, there are vast disparities in the growth of Medicaid spending at the county level.

Oklahoma Public Assistance Medical Care Benefits

As shown in the map above, the counties with the fastest growing CAGRs were Cleveland (13.93 percent), Canadian (13.69 percent), Woodward (12.88 percent), Garfield (12.77 percent), and Rogers (12.65 percent).

Conversely, the counties that saw the slowest CAGRs were Tillman (6.47 percent), Roger Mills (7.29 percent), Cimarron (7.67 percent), Choctaw (7.77 percent), and Adair (7.88 percent).

(Note: The county map actually shows “Public Assistance Medical Care Benefits,” which until 2003 were entirely Medicaid. In 2003, with the implementation of the Children’s Health Insurance Program, this category includes a small “other” category in addition to Medicaid. This “other” category is minuscule and does not bias the results of this analysis.)

Of course, having a high or low CAGR for Medicaid spending might not be a problem if personal income growth is on par. Subtracting the Medicaid CAGR from the personal income CAGR yields those counties where Medicaid spending has most outstripped personal income growth. The counties with the greatest percentage point differential are Garfield (6.53), Kay (6.35), Washita (6.12), Washington (6.08), and Craig (5.96).

Overall, Oklahoma has already seen an explosion in Medicaid. More troubling is that Medicaid dependency has impacted some parts of Oklahoma harder than others. Obamacare’s siren call to expand Medicaid must be rejected.

OCPA research fellow J. Scott Moody (M.A., George Mason University) has worked as a public policy economist for more than 13 years. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications.

OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”

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