Health Care

Patrick B. McGuigan | May 7, 2014

Medicaid Reforms Even Obama (or Republicans) Can Love

Patrick B. McGuigan

It may be hard to believe, but it was only four years ago that health care costs became the top cost driver in the Oklahoma state budget, surpassing the traditional “winner,” K-12 public education.

Debates over the (un)Affordable Care Act aside, there is widespread recognition that Medicaid is the top factor in the state-level cost run-ups for taxpayers. As the state’s largest newspaper, The Oklahoman, noted in an April 9 editorial, “Without reform, Medicaid threatens to consume an ever-larger share of state funding.”

The good news? Even in states with less-than-stellar records, a move toward managed care has provided some savings. But Oklahoma is avoiding managed care in Medicaid, and Barack Obama is not to blame this time.

In keeping with the recent tradition of policy disappointments from professing conservatives—avoiding opportunities for tax cuts, spending reductions, expanded school choice, and new pension reforms—GOP supermajorities around here are deadlocked over Medicaid reform.

State Sen. Kim David, R-Porter, wants a pilot program for privately managed care in Oklahoma’s Medicaid system. Her Senate Bill 1495 would build on reforms that go far beyond cost-cutting and would focus, as The Oklahoman reported, on improved patient outcomes.

On-the-ground health care success has come in areas touching diabetes and high blood pressure, for starters.

Even in the dysfunctional Medicaid system nationwide, 39 states allow one form or another of private managed care—but Oklahoma is not among those (except for a program over the past year and half limited to mental health).

Why is urgent action needed? Folks, here are “just the facts” from Medicaid system administrators, concerning one leading example of waste and abuse: emergency-room visits.

In fiscal year 2013, 548,136 emergency room visits were reimbursed by Medicaid in Oklahoma. All told, 289,135 Medicaid enrollees used the emergency room (approximately 28 percent of all Medicaid enrollees).

Total cost of enrollees accessing emergency rooms in FY 2013 was $178,331,616. Of that, $37,291,466 covered ancillary charges. That includes doctors, pharmacy, lab, radiology, ambulance, and so forth.

The average cost per ER visit by a Medicaid enrollee was $325.34. That includes the ancillaries.

The average number of emergency room visits was 0.5 per enrollee. The average per utilizing member was 1.9 ER visits per year.

Take a look back, just one year.

With more than one-fourth of state residents covered by Medicaid, emergency room costs for Oklahoma’s Medicaid recipients had already reached crushing totals in fiscal year 2012.

That year, 250,030 people in Medicaid utilized emergency room services. Total ER visits reimbursed by Medicaid that year was 528,264, an average of just over two visits for each ER “utilizing member” in the system. (In both years, the average includes many who visited emergency rooms much more often.)

In FY 2012, the total for ER services provided to Oklahoma Medicaid enrollees was $169,642,272, which including ancillary costs.

The average cost per ER visit for Medicaid patients two years ago was $321. (Emergency services are exempt from co-pays in Medicaid. The state does not limit the number of emergency room visits for Medicaid enrollees.)

In short, in just one year state spending on Medicaid patients’ emergency-room visits increased by more than $8 million, and nearly 40,000 more patients utilized the emergency room.

So much for the notion that expanding Medicaid will decrease emergency-room visits.

These results merely build on patterns over many years. Oklahoma’s Health Care Authority has made some effort to counter the problem, with what is called a population management program. Its operatives communicate with “clients” after a problem has been identified.

Still, ER costs financed through Medicaid rose despite the legal and management steps begun in late 2011, in which officials tried to address the inappropriate diversion of Medicaid monies to emergency room use.

They tackled it bassackwards, as Larry the Cable Guy might put it. OCPA’s Jonathan Small observes, “After-the-fact intervention cannot impact the bad numbers, because unless the issue is focused within ERs, there is no incentive not to be seen in the ER hospital setting.”

Medicaid Physicians’ Fees as a Share of the Medicare Reimbursement Rate

All Services: 97%
Primary Care: 97%
Obstetric Care: 97%
Other Services: 96%

All Services: 65%
Primary Care: 61%
Obstetric Care: 68%
Other Services: 75%

All Services: 78%
Primary Care: 82%
Obstetric Care: 73%
Other Services: 78%

All Services: 79%
Primary Care: 70%
Obstetric Care: 74%
Other Services: 111%

New Mexico
All Services: 92%
Primary Care: 85%
Obstetric Care: 100%
Other Services: 100%

All Services: 71%
Primary Care: 74%
Obstetric Care: 68%
Other Services: 69%

All Services: 59%
Primary Care: 57%
Obstetric Care: 57%
Other Services: 68%

All Services: 75%
Primary Care: 75%
Obstetric Care: 73%
Other Services: 76%

Oklahoma Compared to Nationwide Average Medicaid Reimbursement Rate
All Services: +38%
Primary Care: +54%
Obstetric Care: +16%
Other Services: +27%

Source: 2012 Kaiser Commission on Medicaid and the Uninsured/Urban Institute Medicaid Physician Fee Survey

Data like these are not merely the concern of cost-sensitive wonks like Small and myself.

Amy Finkelstein, an acclaimed researcher at the Massachusetts Institute of Technology (MIT), has pioneered national research in this area. A fan of Obamacare, she is known for “measuring the effects of health programs with scientific rigor,” as Bloomberg News has noted. Her studies regularly appear in the magazine Science.

Based on a comprehensive study of Oregon data, as summarized in Bloomberg Business, Finkelstein and her colleagues “found that Medicaid coverage increased emergency department visits by 40 percent.” Medicaid systems have few mechanisms for accounting, even in most managed care states. As a rule, the system simply pays out based on charged fees and available federal dollars.

Florida, Louisiana, Kansas, and other states—states moving toward comprehensive managed care—are having notable success in fighting these trends. Florida’s program features Medicaid counselors who advise ER visitors (again: “clients”) toward more appropriate (and affordable) care with general practitioners.

The Obama Administration agreed to Medicaid plan modifications in these states. Yes, Obama’s team is open to some reforms.

I am frustrated by Oklahoma Republican gridlock because, contrary to rumor, our taxpayers and policymakers have for decades shown concern for and paid attention to the lower-income population when it comes to health care, including Medicaid.

The state created an historic bipartisan accord to provide health insurance for the working poor in the Insure Oklahoma program. This gave those willing and able to work a chance to play by rules similar to (but not the same as) rules for those with higher income.

Thanks to Mr. Obama’s oft-repeated broken promise (if you like your health care plan, you can keep your health care plan), Insure Oklahoma is now on life support, given a short-term extension for only those participants at or below the poverty level. However, it is ending for those between that level and 200 percent of the poverty benchmark.

This is a tragedy for many reasons, not the least in destroying the incentive for people of modest means to participate in the broader economy.

Back to a Medicaid focus, Oklahoma’s system is not stingy with those serving the “client” population. This is demonstrated by the Urban Institute’s Medicaid Physicians’ Reimbursement Survey, summarizing how much Oklahoma’s Medicaid structure pays to reimburse doctors or health care facilities for Medicaid services.

As seen above, Oklahoma is consistently higher in reimbursement (i.e., more generous to physicians and facilities) than surrounding states. In fact, as the final category documents, the state’s reimbursement rate is higher than the national average across the full range of covered services.

Consider this alongside the managed care argument advanced above. It is not specifically addressed to undoing or revising Oklahoma’s rate structure (although policymakers should not rule that out).

Rather, the point is to counter the shibboleth that our relatively poor state has ignored the less fortunate.

In the present arguments, Republicans can redeem themselves for inaction on Medicaid reforms in the model of Florida, Louisiana, and Kansas. Sen. David has a bright idea. Here’s hoping it gets some new life in the last month of the 2014 legislative session.

Patrick McGuigan (M.A. in history, Oklahoma State University) is editor of and Oklahoma bureau chief for the network. He is the editor of seven books on legal policy, and the author or co-author of three books, including Ninth Justice: The Fight for Bork. Last year the Washington Post political blog, “The Fix,” designated McGuigan one of the three best political reporters in Oklahoma.

Patrick B. McGuigan

Independent Journalist

A member of the Oklahoma Journalism Hall of Fame, Patrick B. McGuigan is founder of CapitolBeatOK, an online news service, and editor of The City Sentinel, an independent newspaper. He is the author of three books and editor of seven, and has written extensively on education and other public policy issues.

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