| June 2, 2011

Projecting Medicaid Growth Under Obamacare

Even before the Patient Protection and Affordable Care Act (PPACA), the health care bill commonly known as Obamacare, was signed into law last year, many health policy experts were already speculating that the requirement in the law that states expand eligibility for their Medicaid programs would push most states to the brink of fiscal ruin.

After all, most states’ Medicaid programs are already unsustainable, and Oklahoma is no different. From 2000 to 2010, Oklahoma’s share of Medicaid expenditures grew 169 percent, easily one of the fastest rates in the nation, and now consumes approximately one-sixth of annual state appropriations.

Obamacare is about to make it much worse.

A new study by OCPA and the Cato Institute projects the state’s share of Medicaid funding during the first ten years (2014-23) after PPACA goes into effect will be staggering. Our research estimates PPACA will increase enrollment to 36 percent of the state population by 2023 and will add $11.4 billion to state program expenditures between 2014 and 2023.

These projections dwarf expenditure growth estimates by both the Oklahoma Health Care Authority and the Kaiser Family Foundation. But as Jagadeesh Gokhale, Cato senior economist and author of OCPA’s study, has explained, those projections “are lower because they assume that [PPACA’s] individual mandate will not significantly increase enrollment among people who were eligible for Medicaid but not enrolled under the pre-[PPACA] rules.” On the other hand, OCPA’s research, consistent with research done by the left-leaning Urban Institute and the Robert Wood Johnson Family Foundation, assumes the individual mandate will encourage people to enroll in Medicaid even if they would not face financial penalties for being uninsured.

What this ultimately means is that Oklahoma needs to take bold steps to restrain costs within its current Medicaid program, and fast. Now is the time for the state leaders to scour the program for inefficiencies and lead an unrelenting effort to obtain federal waivers to implement real cost-restraining reforms.

SoonerPoll: Medicaid Recipients Should Pay a Fee If They Smoke

Specifically, the state should seek federal approval to convert Medicaid into a block grant program, which holds the potential of restraining Medicaid growth because the state would know how much federal aid it will be receiving each year. A block grant program could be paired with a premium-support program, whereby the state provides low-income and disabled individuals a risk-adjusted credit or voucher to purchase coverage from among competing private plans. Under this model, an individual would own the plan and could opt to continue paying for the coverage out of pocket if he were to lose eligibility.

Until a block grant and premium assistance program can be implemented, state leaders should take advantage of all options that don’t require federal approval to find efficiencies in the existing program, including requiring increased member cost sharing (premiums, copays, deductibles), rebalancing long-term care away from nursing homes and into community and home care, and eliminating some “optional” covered benefits.

Future discussions regarding Medicaid must contain some or all of the above solutions. Otherwise, state expenditures on Medicaid will likely consume more than half of all state appropriations by 2023.

Jason Sutton (J.D., Oklahoma City University) is a health policy analyst for OCPA.

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