As part of my series on Oklahoma’s Medicaid system, I will periodically have discussions on various topics with people involved with or concerned about the system. This post is an email exchange I had with Jonathan Small, Fiscal Policy Director for the Oklahoma Council of Public Affairs (OCPA) who has talked about the issue in blog posts and editorials. I condensed some of the questions and answers and grouped them together to form a coherent discussion on each topic rather than jumping back and forth.
Me: You state that Medicaid expansion is going to cost $500-million by 2020, but isn’t the federal government covering 100% of the cost for the first three years?
Jonathan: Realistic estimates show that by 2020 (the first 7 years of an ACA expansion), Oklahoma’s share of the cost for the new population will reach $708 million cumulatively [note: he provides this link in the email http://www.ocpathink.org/articles/2090]. That excludes costs borne by the feds the first 3 years. The first 10 years (2014-2023) is over $1.5 billion that the state has to come up with—this excludes the normal cost of growth of current Medicaid.
Me: Even if it is $500-million over five years, isn’t that a relatively small percentage of the amount appropriated every year and an even smaller percentage of the amount the state spends every year?
Jonathan: Given that total state spending in Oklahoma has grown 73 percent since FY-2001, its unlikely government will be cut significantly for new programs. Funding the state portion of Medicaid must be viewed in terms of future growth revenue. In a pretty good year this year the legislature will have about $210 million in new revenue to spend, reports are that Medicaid needs a minimum of $40-$60 million of that just to maintain the status quo next year. So even if annual growth revenue to appropriate has normal sustainable growth by 2017, annual funds needed to pay for the Medicaid expansion would consume more than 50% of growth revenue that year by the legislature. This doesn’t account for the other hundreds of millions of dollars that would be requested and given to other core services or normal Medicaid costs growth.
Medicaid has grown rapidly in Oklahoma, and regardless of the economy. In FY 2000 – 416,785 Medicaid (12.13% of population) enrollees and total Medicaid expenditures of $1.14 billion. By FY 2012 – 1,007,356 enrollees (26.57% of population) and expenditures grew to $4.77 billion—an increase of 190.9 percent in just 12 years. Inflation over this period was just 35 percent. Total population growth in Oklahoma over that same period was just 10.3 percent. Oklahoma’s history with major expansions is that they are more expensive, larger and more burdensome than what was promised.
Me: When including all Medicaid clients, the average cost per year is a little over $5,000. Doesn’t that show that Medicaid is doing a good job of keeping costs down, especially when you consider that the figure is far lower for those not receiving nursing home care?
Jonathan: Medicaid is a welfare program which caps reimbursements at below private insurance levels, to pay for health care services. To the extent providers aren’t reimbursed by Medicaid at private health insurance levels, those costs are shifted to those with private health insurance. One of the primary reasons that Medicaid costs are lower is because they use price and service caps that are being subsidized through taxpayer dollars and higher insurance premiums for those with private health insurance. Even though Oklahoma’s Medicaid system is one of the highest reimbursing in the country, it still reimburses below private health insurance levels. Approximately a third of Oklahoma doctors aren’t accepting new Medicaid patients. Medicaid has mixed results controlling costs, for example there was a significant backlash when the OHCA determined a while ago that C-section birth deliveries had drastically increased. But that was a determination after the expenses were made. Just recently, an effort had to be started to address the issue of significant costs for premature or high risk births and the problem associated with patients, particularly Medicaid patients not using free prenatal care services. Medicaid faces costs challenges that can be masked by averaging and not looking at the actual care provided on a per patient basis.
Currently the aged, blind and disabled, the original Medicaid population, now only comprises about 16 percent of those enrolled in Medicaid and only about 47 percent of the cost in Oklahoma. Everyone else on Medicaid is either children, who are relatively healthy from a coverage population standpoint, pregnant mothers and a relatively small number of extremely poor adults. The ACA Medicaid expansion comprises a relatively new and unknown population for many states and especially Oklahoma. Some states for some time have drawn on more federal tax dollars for expanding their Medicaid populations to able-bodied adults, long before the ACA proposed expansion. Several of those states are increasing taxes or cutting reimbursements or both to keep up with significant Medicaid cost growth. This population is mostly able bodied adults, many without dependents and often who have not had health insurance for some time. For example, both Arizona and Maine drastically underestimated their adult population expansions and associated costs. These states significantly underestimated their costs relying heavily on historic costs which were distorted by the problems of averaging costs of dissimilar populations. Arizona estimated its childless adult population to only cost approximately $2900 per person and actual costs were $7300 per person. This is because this population tended to be older than child dependent parenting years, and used medical, pharmaceutical and mental health services at a much higher level. Maine has had very similar costly results. In fact, Maine’s current HHS Secretary – the former Maine Hospital Association Vice President who advocated for the expansion – regrets her previous support of the expansion and is warning states about Maine’s disastrous experience with expanding to able bodied adults.
Medicaid largely prevents cost sharing, even for destructive or costly and risky behaviors, but is it unreasonable to ask able-bodied working adults to share a small part directly in their coverage and care, especially if they are chronically performing risky behaviors? It is difficult to create this kind of “hand-up” and personal responsibility in old Medicaid.
Me: Does that mean you favor some sort of copay or system where recipients pay for part of their care? If so, any ideas how much that would reduce the state’s responsibility?
Jonathan: Yes, all able bodied working adults should contribute, even if in a small way, directly to the care they are provided. That is one of the major problems with the ACA, by putting able-bodied adults in our current old Medicaid system you almost virtually make it impossible for them to share in the cost of their care because the federal government’s “no barrier to care” provisions which see small co-pays as illegal. Able bodied working adults will comprise nearly 100,000 of the new population. If those individuals were required to pay just $25 a month, which is a lot less than many of the other monthly bills this population has, that would reduce the state’s cost by $30 million a year.
Me: There are hundreds of thousands of Oklahomans currently living without health insurance and they often end up costing taxpayers more money when they do need care because they go to the emergency room. If we don’t expand Medicaid, how do we help fix that situation?
Jonathan: In order to address the current challenges in our health care system we are going to have to stop our infatuation with who pays for care received and start focusing on cost. When I was without health insurance because of the consequences of the ACA, why is it that when my daughter’s arm was broken we received a bill for over $1,000 (that they said was meant for an insurance company) for less than about 30 minutes of care? Why weren’t other options presented without my relentless inquiry? I asked repeatedly for a quote before arriving where the care was delivered and no one would provide me an estimate prior to charges. Why is it that a co-workers MRI was quoted at $1,700 if it was going to be submitted to insurance but then was finally told only $475 if paid personally? Why wasn’t this option presented without the person asking? Why is it that no one can get a straight answer on how uncompensated care is derived? Should hospitals, particularly non-profit ones be reimbursed for virtually all actual care provided? Is it charity care if you constantly remind the public that you provided it and bemoan doing it? Health care costs are out of control, and it is due in large part to nearly complete lack of transparency in medical care pricing, the tax code’s preference to third party payment of health care, significant government subsidizing of health care and removing incentives toward healthy behavior and self-payment of routine medical care.
Me: Can you explain this phrase a bit more: “the tax code’s preference to third party payment of health care”? Are you talking state tax code, federal or both?
Jonathan: Right now, both the federal and state personal income tax codes allow employers a deduction for the purchase of health insurance, but employees are not allowed that same benefit. This is why the employer and group insurance market is so much larger than the individual insurance market. Because government picks employer sponsored insurance as the winner, employees and citizens lose and this is a major factor for why people get stuck with no insurance in-between employers. If your employer is responsible for purchasing, negotiating and monitoring the insurance/care, it puts another person in between the end-user and the predominant payer. Plus the tax code then disallows deduction of medical expenses until after they have reached 7.5% of AGI! With our progressive tax system, rules like this are extremely damaging because progressive marginal tax rates penalize the worst the next dollar earned. The ACA makes this worse by increasing the medical expense threshold to 10%, then also capping flexible spending accounts, and passing other rules that are going to make the existence of health savings accounts very difficult. The ACA is actually punishing those who save for routine care and those that save to plan for future surgeries!
We have to see a bi-partisan political-official and citizen led local, state and national campaign to encourage Medical providers to implement transparent medical pricing.
Increasing higher paying job opportunities so people gain either the economic means or employer access insurance coverage should be the second priority, which is why replacing our broken workers’ compensation system is so important.
Options like state/employer and employee cost sharing for health insurance coverage are viable options as well. This can be done with or without federal funds, and is much easier to design in a constructive way.
Me: I thought I read somewhere that Insure Oklahoma was going away because of either the ACA or OK’s refusal of funds for Medicaid expansion. Isn’t that exactly the kind of program you want to expand? Can that still be done without federal funds?
Jonathan: It appears likely that the current administration is going to hold hostage Insure OK, which provides a hand up and encourages personal responsibility, to try and force the state into doing their federal government controlled, one-size fits none old Medicaid expansion. This is why so many doubt that they are really just concerned about health care needs, otherwise they wouldn’t try to destroy working existing programs. Insure OK is exactly the kind of program that should be utilized if one feels government should try and help meet the needs of the expansion population, and there is nothing to keep the state from preserving existing funds, raising private funds and encouraging and increasing cost sharing to continue the program at the state level. The state has nearly infinite flexibility when it is structuring programs funded by its own money.
Finally, I currently serve on the board of directors of a local free health clinic that provides multiple types of medical care. Our work has taught me that taxpayer expense is often not the best solution and that rebuilding families is often what is needed most.