OCPA column: Medicaid expansion passed -- now we must pay for it

Medicaid expansion passed; now we must pay for it

By Jonathan Small

The June passage of Medicaid expansion means up to 628,000 able-bodied Oklahomans could be added to the medical-welfare program. And that creates a new challenge for state policymakers: How can they pay for expansion, particularly at a time of economic challenge?

One of the best solutions is for voters to approve a pending state question that could cover roughly $50 million in expansion costs by redirecting a portion of the state’s tobacco-settlement funding to Medicaid. But that will cover only a portion of expansion costs.

That’s because the true state cost of expansion is likely much higher than the laughable $164 million annual estimate supporters touted. At typical Medicaid costs, the true expense could run up to $374 million per year if all eligible citizens enroll.

Proof that Medicaid-expansion proponents lowballed their cost estimates came within weeks of the ballot measure’s passage. By August, a top legislative budget leader announced cost estimates had already surged from $164 million to $246 million—so $50 million is only a down payment.

Work is already underway, quietly and behind the scenes, to determine how to cover the remainder of Medicaid expansion costs. No doubt, we can expect some groups will soon declare that new taxes are now necessary.

But there are other, better options … such as controlling costs. For too long cost-control has been ignored with Oklahoma’s Medicaid program, even prior to expansion. That’s one reason Oklahoma’s state spending on Medicaid increased 553 percent from 1995 to 2015 (and has continued growing since).

One way to rein in that runaway spending is to incorporate managed care into Medicaid.

Nationwide, about two-thirds of Americans on Medicaid are already served in Medicaid managed care programs. The fact that Oklahoma doesn’t use managed care in Medicaid makes our state an outlier.

Also, the “fee for service” system now used by Oklahoma’s Medicaid program effectively incentives providers to subject Medicaid patients to more tests and services, even when little medical benefit is expected, simply to increase state payments to the provider. That drives up taxpayer costs but doesn’t automatically translate into improved patient outcomes.

That’s why use of managed care in Ohio’s Medicaid program reduced expenses by up to $3.2 billion combined from 2013 to 2015, and by $3.8 billion over a six-year period in Texas.

Managed care has also generated improvement for Medicaid patients in some states. In Kentucky, Medicaid managed care generated a 93-percent increase in smoking cessation consultations, a 33-percent increase in flu vaccines for children, and a 17-percent decrease in amputations (which are often caused by untreated diabetes).

No matter what, Medicaid expansion is going to be a financial drain on Oklahoma state finances. The challenge for lawmakers is to keep that drain to a trickle, rather than a gusher.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.