Our country is now poised through the Affordable Care Act to help millions of American families and small businesses and their employees access high quality, affordable health care coverage.  This isn’t going to happen by itself.  This is not simple.  If it were simple, someone would have accomplished it years ago.  This is complicated, but it is not beyond our grasp [..]

We are ready in Maryland to turn the corner on the healthcare costs that have been sapping our productivity as a people and as a nation.  Sapping the productivity of our businesses.  Taking from them the ability to reinvest in their own plants and their own opportunities and their own markets. Costs that force moms and dads to choose between health care and paying for groceries, or tuition, or school supplies, heat, rent, mortgage payments.  These are the big decisions that happen in the most important place – the kitchen table of every family home.

In Maryland we believe we are gaining a competitive advantage by being an early implementer [of health care reform].  Last year we had the best year of new job creation that we’ve had since the recession hit [..] Why is it that at the same time we’ve cut 7.5 billion from our state budget, we’re increasing the ranks of those who are covered by healthcare so very, very dramatically?  It’s because there is an historic truth – not a Democratic truth or a Republican truth – but an American truth and an economic truth.  In order to create jobs, a modern economy requires modern investments.

Along with the investments we make in the education of our workforce, in the innovative capacities of our people, there is also the health of our people.  That too is an economic development investment.  It’s an investment in greater productivity, greater prosperity, and greater promise.  We’ve chosen to invest in healthcare [..] Our goal was to support the health of our workforce.  So moms and dads could go to work, so they could be productive, so they wouldn’t miss days from work or searching for work because they had to take care of sick kids or to take care of themselves.  It’s very hard to put in a full day’s work if you’re sick, if you can’t go to a doctor.  You see that played out time and time again in the economies of third world nations.  A healthy workforce is a productive workforce, is a profitable workforce.

In some places in our country Medicaid expansions are kept quiet.  States worry if you let people know the uninsured are becoming covered and they might go to the doctor, that this could cost money and that that might be something our neighbors scowl at.  In fact, some of our sister states in their legal briefs to the Supreme Court are describing people signing up for Medicaid as “one of the harms brought to states” because of the Affordable Care Act.  I encourage those who make that argument to read Matthews gospel 25[..] I want to mention the tragic case of Deamonte Driver, a little 12-year old boy in Prince George’s County who died because his family could not afford to go get a toothache looked at.  That toothache led to an infection that led to his brain that took his life.  Deamonte lived just outside this nation’s capital [..]

We might want to ask [those who say they want to repeal the law] what advice they would give to the millions of Americans who don’t have health insurance.  Crossing your fingers is not really a responsible option.  Do they believe, like that debate audience, we should allow hospitals with an injured uninsured patient to just ‘let him die’?  [..] That’s not how you move America forward and that is not what the vast majority of Americans in their heart expect of ourselves or our government.

We have a responsibility to make the business case for the Affordable Care Act.  What are the opportunity costs of inaction?  When a small business is paying another fifteen to twenty percent annually, every year for health insurance, how many fewer people are they employing? How many dollars could have gone into expanding markets for their products or services?   What are the opportunity costs for families when a mom has to choose between a roof over their head, food on the table, or healthcare?

People who are sick can’t work.  Mom and Dad can’t provide for their family if all of their dollars are going to rising healthcare costs, let alone keep paying the mortgage if all of the sudden they’re wiped out by some unanticipated hospital bills.  In the private sector rising costs are eroding the quantity and quality of health benefits for American workers.  In the public sector health costs are the single greatest threat to our fiscal sustainability [..]

Peter Orzag wrote these words:

It is no exaggeration to say the United States standing in the world depends on its success in constraining the healthcare cost explosion.  Unless it does, the country will eventually face a severe fiscal crisis or a crippling inability to invest in other areas.

Truly, bending the cost curve requires innovation [..] Innovations like the health information exchange which allows the sharing of data between hospitals, labs and thousands of doctor’s offices.  This isn’t something that we’re imagining.  It’s not something that we’re hoping for.  It’s something that we’re doing [..]

There is no area that cries out for better choices more so than the area of containing healthcare costs, of having better preventive care.  Making our workforce healthier, making the balance sheets of our small businesses better so that they can reinvest in more jobs and more opportunities.  We need to talk about this in terms of the business case for healthcare.  There are better ways to do this, virtually every country has shown that this is possible [..]

We’ve seen what works, but we’ve been too timid to do what our parents and grandparents had the courage to do.  Which was to do it at scale, to do it in an impactful, broad way.  To realize that in our America there is no such thing as a spare American.  Everyone is needed.  Are other countries so much more innovative than us that they can figure out how to do this to scale and we can’t?  I don’t buy that [..]  There are in fact challenges so large that we can only hope to tackle them together.  Making better choices in terms of healthcare is one of them.

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One popular myth is that Medicaid costs are rising exponentially and the program is riddled with waste.  In fact, scholarly research has demonstrated that Medicaid costs about 20 percent less on average per person than private insurance, so the program is quite lean.  While it is true that health care costs are rising, it’s important to remember that they are rising across the board, not just for the Medicaid program.  The state can also take advantage of a favorable federal matching rate to leverage their health care investment.  For every $1.00 the state government invests in SoonerCare in FY 2012, the federal government will contribute $1.77.

Another common myth is that Medicaid is free healthcare for people who don’t work.  Actually, most working-age adults in Oklahoma are not eligible for comprehensive SoonerCare coverage.  Only 9.6 percent of SoonerCare/Medicaid recipients in the state are healthy working-age adults (not counting those receiving only family planning services). That’s because eligibility for an adult who is neither elderly, disabled, or chronically ill is restricted to parents at or below 37 percent of the federal poverty level.  That’s just shy of $7,000 a year for a family of three.  The vast majority of Oklahomans on SoonerCare, about 70 percent, are kids and seniors.

SoonerCare/Medicaid is also instrumental in caring for chronically ill uninsured Oklahomans.  In 2011, the program provided care to 8,430 cancer patients and treated 81,920 with heart disease or stroke.  It also plays a central role in supporting the state’s aging and institutionalized population by helping cover the costs of nursing home care:

With nursing home or institutional care coverage largely unavailable through Medicare or traditional private health insurance plans, Medicaid is the nation’s de facto financing system. SoonerCare OLL (Opportunities for Living Life) funds nearly 70 percent of all long-term care (both nursing facilities and intermediate care facilities for the mentally retarded). SoonerCare provides coverage for low-income people and many middle-income individuals who have become nearly impoverished by “spending down” their assets to cover the high costs of their long-term care.

The new federal health care law will soon usher in significant changes to Medicaid, sparking a welcome and ongoing dialogue about the cost and value of the program. Pivotal in these discussions is an understanding of SoonerCare’s safety net function – without which thousands of Oklahoma families would forgo basic health services for their children, lack necessary medical care for their disabled loved ones, and be left to shoulder alone the unsustainable burden of the long-term care of their parents and grandparents.

Click here to download ‘Medicaid 101: The SoonerCare Safety Net’

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Let’s assume that you stand on principle that it’s not the government’s role to engage the health care system.  Then we have a gravely serious problem.  We are very nearly the unhealthiest state in the country and we’re getting worse.  Individual behaviors – smoking, diet, fitness - certainly affect health, but it’s by no means certain that they’re the most important factors.  What we’re facing in Oklahoma is bigger than the sum of each individual resident’s health choices.  Acute structural defects in the state’s health care system demand solutions that are bigger than each of us and addressing them will benefit all of us.

First, we do not have enough doctors, nurses, and health care providers in Oklahoma.  If you live in an urban area, this will be hard to relate to, but it’s true.  We rank 49th in availability of primary care physicians, with only about 82 physicians per 100,000 Oklahomans.  The consequences of this fact should be obvious.  Without access to regular preventative care and treatment when you’re sick, minor health problems can become catastrophic illnesses.  Rural Oklahomans could be making healthy choices, but end up unhealthy because of lack of access to care.  We need government support for efforts that promote access to care, like schools of community medicine, graduate student loans, and incentive programs for doctors who settle in remote areas.  How can we attract modern economic development to a state where many residents haven’t ever had a doctor?

Second, we have hundreds of thousands of households living in poverty.  Poverty affects a person’s health in innumerable ways that are beyond their control.  Not being able to afford medical care, even if you have a doctor nearby, can be an insurmountable hurdle to well-being.   Children living in poverty are especially vulnerable, as their health choices are totally dependent on caregivers who are already struggling to meet other basic needs like food, clothing, and shelter.  The state and federal governments, through the SoonerCare/Medicaid program, currently subsidize medical care for 472,111 Oklahoma children who might otherwise go without.  If you don’t think that government has a role to play in the overall health of our citizens, then you’d better be prepared to count those children out.

Other structural conditions, many perpetuated by living in poverty, also contribute to poor health:

• Lack of medical care, malnutrition, and second-hand smoke as an infant or during early childhood has lifelong effects on health.
• Limited access to healthy groceries coupled with abundant access to fast food in urban areas (‘food deserts’) significantly constrain household diet choices.
• Poor air quality exacerbates chronic conditions like asthma and other respiratory disorders.
• Fewer gyms and public parks in low-income areas make consistent exercise more challenging.
• Insufficient income to purchase nutritious food coupled with lack of knowledge about healthy eating stacks the deck against low-income households.

Government can and should invest in improving the structural conditions that destine impoverished people to a lifetime of poor health outcomes. There is no other alternative.  Oklahoma households cannot continue to work, save, and invest as more and more of their labor and income is taken up caring for ailing parents and grandparents.  The economic development goals of the state cannot be met with an ever-sicker, ever-poorer workforce.  Individual health problems eventually become public health problems that the state must address.  If we don’t come to terms with the grim reality of our health care situation on the ground, we cannot expect the state to enjoy continued, broad-based prosperity.

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What’s up this week at Oklahoma Policy Institute? The Weekly Wonk is dedicated to this week’s events, publications, and blog posts.

This week OK Policy released a paper showing that state costs under the new federal health care law are likely to be modest and could even yield net savings.  Click here to access a 1-page summary of our issue brief: Health Care Reform and the State Budget: Savings Likely to Partly or Fully Offset Modest New Costs.

OK Policy testified this week before the Joint Committee on the Federal Health Care Law.  Click here for our presentation exploring Oklahoma’s options for implementing state health insurance exchanges, a major requirement of the new law.  Read the Tulsa World’s coverage of our paper along with a summary of the committee meeting.

OK Policy intern Emily Callen explains why higher education remains a strong investment for Oklahomans and the state as a whole.  Yesterday’s OK Policy Blog points to evidence that the state’s personal income tax has very little to do with businesses’ decisions to locate in Oklahoma or elsewhere.  Oklahoma Policy Institute was mentioned in a NewsOK piece that called for thorough, numbers-based analysis, not platitudes, in the tax reform debate.

In the Know, Policy Notes

• Economist Mark Thoma explains in MSN Money why we have room to spread the wealth without harming efficiency and growth.
• Economist Nancy Folbre discusses gender differences in economic hardship during the recession.
• An economic historian shows that consumer spending, amplified by government outlays, are what created most growth in the last century, not business investment.
• Stateline reports on how Oregon may become the next national health care model for seeking to control costs while improving public health through community care.
• A new report from the Robert Wood Johnson Foundation finds that the Affordable Care Act will not adversely affect employer-sponsored health insurance coverage.

Numbers of the Week

• 533 – Number of operating school districts in Oklahoma for the 2010-2011 school year, 9th most in the nation.
• 5.9 percent – Oklahoma’s unemployment rate for September 2011, up slightly from the previous month’s rate of 5.6 percent.
• 3,632 – Number of bankruptcy filings in Oklahoma during the 2nd quarter of this year, down 14 percent from the same quarter in 2010.
• 58 – Number of USDA certified organic farms in Oklahoma, representing just one half of one percent of the 10,903 certified organic farms in the United States in 2008.

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We do not yet have a comprehensive study of the projected costs and savings of the Affordable Care Act for Oklahoma’s state budget. However, as a new OK Policy issue brief shows, most studies of the impact of the Affordable Care Act have concluded that increases to state Medicaid budgets will be modest. National studies from the Urban Institute and projections developed by the Oklahoma Health Care Authority have estimated that state spending on Medicaid may grow by $200 to $800 million between 2014 and 2019 or 2020, depending on various assumptions, while increasing state Medicaid spending by under 10 percent.  The federal government will assume over 90 percent of total costs of expanded Medicaid coverage. To cite the conclusion of the study by John Holahan and Irene Headen, the Urban Institute’s experienced and widely-respected health policy analysts:

Most of the cost of the new expansion will be borne by the federal government. States will have relatively small increases in state spending, but these will be swamped by new federal dollars that they will receive because of the reform. This is particularly true of the states that have low coverage today and will experience the largest increases in individuals newly eligible for the program.

Several studies at the national and state levels that have considered a broader range of factors associated with the Affordable Care Act – such as the federal government paying for the mental health care costs of those currently without insurance and new premium tax revenues from those purchasing insurance through a health care exchange – have concluded that the cost of the health care law will be less for states and could even yield net savings. A July 2011 report from the Robert Wood Johnson Foundation asserts:

State governments will collectively save between $92 billion and $129 billion from 2014 to 2019 because of provisions in the Affordable Care Act that are designed to reduce the uninsured population and provide federal funding for functions that, in the past, have been financed by states and localities.

Sticking out from this consensus, a report from the Oklahoma Council of Public Affairs and Cato Institute contends that Oklahoma’s Medicaid spending will increase by a staggering $11.4 billion during 2014-2023 as a result of the ACA, and grow 35 percent greater than without the new federal law.  OK Policy’s issue brief carefully shows how the OCPA/Cato Institute is based on flawed and exaggerated assumptions about who will enroll in Medicaid under the new law and how much they will cost. For example, all studies take into account the effect of enhanced outreach efforts and the individual mandate to bring those currently eligible but unenrolled out of the woodwork. This population of ‘old eligibles’ will only receive the traditional federal match rate and so will be considerably more expensive to the state. Because Medicaid eligibility for working-age adults in Oklahoma is  restricted to parents of dependent children under 37 percent of the poverty level, the state has few eligible but unenrolled individuals – 60,000, according to estimates by the Oklahoma Health Care Authority, most of whom are children. Yet the OCPA/Cato report somehow projects that some 145,000 individuals who are currently eligible but unenrolled in Medicaid will sign up under the Affordable Care Act.  This enrollment surge among the ‘old eligibles’ goes well beyond any ‘woodwork effect’ and appears to be more of a pure ‘thin air effect’

Similarly, in developing their cost calculations, the OCPA/Cato study overstates both the current Medicaid population and the average cost per recipient. Compounded together, the flaws in their study produce highly inflated estimates of the future cost of the Medicaid budget. At the same time, the report neglects to consider ways that additional state costs will be partly or fully offset by savings to the state budget under various provisions of the Affordable Care Act that reduce the uninsured population and provide federal funding for functions previously financed by the state.

There is no doubt that paying for health care at a time of scarce resources will remain an ongoing challenge for state leaders. However, by significantly reducing the number of Oklahomans without health insurance, the Affordable Care Act will reduce the strains that uncompensated care places on our health care providers across the state and will provide better health care and greater financial security to Oklahoma families. These benefits will  far outweigh the likely modest cost to the state budget of paying a small portion of the total bill.

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Budget-cutting efforts in Washington are adding to the perils confronting the state budget. Federal spending has a major impact on both the state economy and the state budget. The federal government spent $38.5 billion in Oklahoma last year, which works out to $10,256 for each resident.  The largest component of federal spending is for direct payments to individuals for Social Security and Medicare, along with salaries and wages to military personnel and other federal employees based in Oklahoma.

The federal government also transferred $7.8 billion in grants to state and local governments for over 530 programs.  The largest of these by far is Medicaid ($3.5 billion). In 2008, almost one dollar of every three in Oklahoma’s total state revenue came from the federal government.

Under the Budget Control Act approved this summer, the Joint Select Committee on Deficit Reduction, known as the Supercommittee, has until November to propose at least $1.2 trillion in deficit reduction measures over the next decade. If the Joint Committee fails to agree on the requisite savings, or if its recommendations are rejected by Congress or the President, then automatic procedures to achieve $1.2 trillion in deficit reduction will take effect (You can watch our video explanation of the Budget Control Act or see our summary slides). The impact that the Budget Control Act will have on Oklahoma and other states will depend decisively on whether the Joint Committee reaches an agreement, and what the agreement looks like.

Should the Joint Committee reach an agreement, the impact on the state budget will depend on the size and make-up of the deficit-reduction measures it adopts – in particular, decisions affecting Medicaid. In September, President Obama released a proposal aimed at reducing the deficit by over $4 trillion over the next ten years through a combination of spending cuts and tax increases. The President’s plan includes modest cuts to Medicaid spending totaling an estimated $66 billion over ten years, primarily by reducing limits on provider fees and phasing in a new blended match rate for Medicaid and CHIP.  His plan does not envision additional cuts to discretionary spending beyond those agreed to under the Budget Control Act. However, it is quite possible that any agreement would include much deeper cuts to Medicaid and to other federally funded state programs.

Should, however, the Joint Committee fail to reach an agreement, this outcome will trigger automatic cuts known as ‘sequestration’. Under sequestration, discretionary spending will be subject to across-the-board cuts, while most mandatory spending will be exempt. Many of the largest federally funded state-run programs will be exempt from automatic cuts, including Medicaid and CHIP, cash assistance payments, major nutrition programs such as WIC and the school lunch program, vaccines for children, child care entitlement spending, and transportation. In total, Federal Funds Information for the State estimates that of $497 billion in federal funding for major grant programs, $364 million, or 73 percent, would be exempt from cuts under sequestration.

But even if only roughly one-quarter of federal grant payments to the state are subject to cuts, the impact would be significant. The Center on Budget and Policy Priorities calculates that non-exempt programs would face a 9 percent annual cut under sequestration effective January 2013. These cuts would be above and beyond $900 billion in cuts to discretionary programs over ten years already agreed to under the Budget Control Act. Programs facing cuts include:

• almost all federal education spending, including Title I funding for low-income students, IDEA funding for students with special needs, and Head Start;
•  important social programs, including child welfare services, community service and community development block grants, low-income heating assistance, housing programs, and non-mandatory child care spending;
• law enforcement programs;
• environmental protection programs;
• agricultural programs.

It’s also important to note that if automatic cuts take effect, half of all cuts, equal to $54.7 billion each year from 2013 to 2021, must be absorbed by the defense budget.  States such as Oklahoma with a large military presence would be disproportionately affected by such deep cuts in defense spending.

The Joint Committee can avoid automatic sequestration and minimize cuts in Medicaid and other grant programs to states to the extent it achieves part of its deficit reduction goals by increasing federal revenues rather than reducing federal support to states.  Since Oklahoma is not a wealthy state, Oklahoma would likely do better under a plan that reduced deficits by raising revenues from the well-off than by cutting aid to states.

Whether states should be rooting for the devil known (the failure of the Supercommittee triggering significant cuts to many discretionary programs but exempting Medicaid) or the devil unknown (an agreement where everything is on the table, including Medicaid) can’t really be determined. Either way, we can expect that federal cuts are coming and that they will make the challenge of funding core services even more daunting in the years ahead.

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Medicaid is the primary source of health insurance for low-income children, pregnant women, seniors, and individuals with disabilities. The federal-state program covers 47 million Americans, or just under one in five of all those with health insurance coverage (2009). In Oklahoma, 728,594 persons are covered by Medicaid as of May 2011; the majority (63 percent) are low-income children. Medicaid is administered by the states with the federal government assuming a majority share of the costs.

As with all health care costs, the cost of Medicaid has been rising rapidly in recent years and has been absorbing a growing share of state budgets. As we showed in this recent blog post, the Oklahoma Health Care Authority, the state’s Medicaid agency, will receive 15.1 percent of state appropriations in FY ’12, compared to 6.9 percent in FY ’01. In part, rising Medicaid costs are the result of  rising enrollment, especially of children. Employer-based coverage for children has declined and the state expanded eligibility for children up to 185 percent of the federal poverty level. The new health care law, the Affordable Care Act, expands Medicaid eligibility for low-income adults up to 133 percent of the federal poverty limit in 2014. According to a study for the Kaiser Commission on Medicaid and the Uninsured, the health care law is projected to increase Oklahoma’s Medicaid enrollment by  350,000 – 470,000 individuals and increase the state’s Medicaid spending by 4-6 percent. The federal government will assume well over 90 percent of the costs of Medicaid expansion in the initial years, with states covering the remainder.

In these tight budget times, it is especially critical to be sure that public funds invested in Medicaid have an impact. The new study (available only for purchase),  from a team of leading health care researchers and economists published by the National Bureau of Economic Research, provides encouraging evidence of the benefits of Medicaid coverage – and, conversely, of the costs of being without insurance. The study examines what happened in Oregon when the state opened a waiting list for a limited number of spots in the Medicaid program, drawing 10,000 names by lottery out of a pool of some 90,000 applicants.  By comparing a sample of  those chosen to apply (the ‘treatment group’) to a sample of non-applicants, the researchers were provided a unique opportunity to apply scientifically rigorous methods to the study of social policy.

In the first year, the study finds significantly better outcomes for the treatment group in three key areas (based on summaries from the Center on Budget and Policy Priorities, New York Times and Washington Post):

• Increased health care utilization: Compared to the uninsured group, Medicaid recipients got 35 percent more outpatient care, 30 percent more inpatient care and 15 percent more prescription-drug care. They were 70 percent likelier to have a regular office or clinic where they could receive primary care and women were 60 percent likelier to have mammograms,
• Better health condition: Medicaid recipients were 25 percent likelier to report themselves in “good” or “excellent” health and 40 percent less likely to report a decline in their health in the last six months.
• Greater financial stability: Those with Medicaid were 25 percent less likely to have an unpaid medical bill sent to a collection agency and 40 percent less likely to have to borrow money or leave other bills unpaid in order to cover medical expenses.

According to Katherine Baicker, a Harvard economist who worked on the study and was a member of George W. Bush’s Council of Economic Advisers:

The broad characterization of what we’ve learned is Medicaid matters. It improves your health, increases utilization, and reduces the financial strain against being insured.

In a state like Oklahoma that has a high rate of uninsured and ranks among the unhealthiest states, the study also demonstrates, at least implicitly, some of the costs of being without health insurance – less timely care and poorer health for our workforce, greater debt and financial strain for our households. Expanding Medicaid coverage to low-income adults thus provides us with a real opportunity in the coming years to promote family economic security and overall economic prosperity for Oklahoma.

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A series of visualizations created with the online tool Many Eyes illustrates this fact well. The graphs are derived from data compiled by OK Policy on the percentage of total state appropriations received by the ten largest agencies, plus another category for all other agencies, from FY ’00 to FY’12.

Click on any of the images below to see a larger, interactive version.

First, this bubble chart shows the percentage of total appropriations each agency received in FY ’12. (Click the image to see the bubble sizes for previous years.) This shows that the 10 largest state agencies receive almost 90 percent of appropriations dollars. About a third of the budget goes to Common Education, and the combination of Common Education, Higher Education, and Career Tech make up half of the budget.

This stack graph shows the change from year to year in percentages going to each agency. Since FY ’00, the percentage going to all except two of the top ten agencies has changed by less than a percentage point. Exceptions are: (1) Transportation, which saw a large decline in its appropriations budget but was supplemented with a number of bond issues, and (2) the Health Care Authority, which experienced a significant increase.

That change is displayed most dramatically in this chart, which shows the percent change of the share going to each agency with an FY ’00 baseline. The Health Care Authority, which administers the Medicaid health insurance program, shows the most dramatic deviation, due to factors largely out of the state’s control — the rising cost of health care and the decline of employer-based coverage, along with federal requirements to provide care for those in need. Most agencies hover in the middle, though Juvenile Affairs has seen a gradual decline and Mental Health and DHS have seen a gradual increase. Common Education’s share of the total budget has remained very consistent throughout the 12-year period.

All of the top ten state agencies’ functions fall under categories that are considered core services: education, transportation, public safety, health, and human services. While this data provides only a very broad view of the state budget situation, it does reveal how little leeway lawmakers have to protect some agencies over others when overall revenues decrease.

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Governor Mary Fallin and legislative leaders’ recent decision to reverse course by rejecting the federal grant and relying instead on state and private money to build an “Oklahoma Health Insurance Private Enterprise Network” is a symbolic victory for the most vocal opponents of  health reform.  Unfortunately, this puts unnecessary strains on the state budget and sends Oklahoma on a collision course with federal law. More importantly, it is likely to deprive Oklahomans of access to a strong, well-regulated, consumer-friendly marketplace to purchase private insurance coverage and will do nothing to actually make health insurance more affordable for Oklahomans.

As we discussed in this blog post, one of the most important provisions of the Affordable Care Act is the requirement that states establish private insurance marketplaces, or ‘exchanges’, to sell plans to individuals and small groups in their state beginning January 1, 2014. States have some flexibility in setting up their exchanges, but all exchanges must meet certain minimum requirements set out in Section 131 of the ACA. In particular, the online exchanges must:

• Certify that plans sold in the exchange meet quality standards. Qualified health plans must offer essential benefits and meet regulatory standards for provider networks, quality improvement, accreditation and more.
• Review rate and premium increases. Exchanges will review and approve premium increases and mandate that insurance companies spend most consumer premium dollars directly on medical care, not overhead or administration.
• Enroll individuals and businesses in a user-friendly way. The exchange must allow consumers to view, compare, and purchase coverage online.  Exchanges must also determine an applicant’s eligibility for tax credits that subsidize the cost of coverage, as well as determine eligibility and enroll individuals in Medicaid and other public programs.
• Provide consumer-friendly features like a toll-free hotline, an online cost-of-coverage calculator, access to “navigators” to assist with enrollment, and more.

In other words, the exchange envisioned by the Affordable Care Act is not just a website that enables plan and premium comparisons – consumers can do that now through existing websites and search engines. It is a full-fledged health insurance marketplace where private insurance will be sold and regulated with robust consumer protections.

Oklahoma is well-positioned to implement this kind of strong exchange. For example, the Insure Oklahoma program is a partnership that provides public subsidies to small businesses and their employees for the purchase of private insurance. The Oklahoma Health Care Authority already operates an online system to determine eligibility and enroll applicants in Medicaid and other health benefit programs. The state also operates the Oklahoma Health Information Exchange to expand the use of health information technology to  promote better health care. This existing infrastructure is what led Oklahoma to receive the Early Innovator Grant, which in turn provided the opportunity for Oklahoma to construct an integrated, technologically-sophisticated exchange.

Is there any chance that Oklahoma will develop a strong exchange after rejecting the federal grant? The answer is almost certainly “no,” for both fiscal and political reasons. Without federal dollars, Oklahoma lacks the resources to build a strong, effective exchange. Speaking to a meeting of health insurance underwriters in March in defense of her decision to accept the $54 million, Governor Fallin was asked about the feasibility of rejecting the federal grant and generating state money for an exchange. After noting that all state agencies have taken cuts over the past two years and that the state faces a $500 million budget shortfall for the year ahead, the Governor replied:

So things have been pretty tight. I’m all about tightening our belts and creating more efficiency and effectiveness but there are some of our state programs that are kind of getting to the bare bones. So do we have the state money for the exchange? No we don’t.

This is what led the Oklahoman to conclude that in rejecting the federal grant, “ideology trumped common sense.”

Yet even if the money to support an exchange were to materialize, the state’s political leaders have signaled their intent to resist developing an exchange that conforms to the requirements of the Affordable Care Act.  Last week, legislation to implement the ‘Oklahoma Health Insurance Private Enterprise Network’,  SB 971, was introduced in the Senate. Apparently responding to pressure from insurance companies, agents and underwriters, the state’s “non-exchange” would be little more than a search engine for information and referrals.

The network set out in SB 971 falls well short of meeting even the most basic standards set out in the Affordable Care Act in several respects.  The network would be expressly precluded from exercising regulatory authority, even though federal guidance has specified “regulatory standards in five areas that insurers must meet in order to be certified as qualified health plans by an Exchange.” SB 971 seems to require the network to accept all health plans, even those that fail to meet the essential health benefits package or quality standards that the ACA deems necessary in order to participate in the exchange. The network seems unlikely to be able to assume core exchange functions, such as determining applicants’ eligibility for subsidies or public health insurance coverage, directly enrolling individuals and small businesses in coverage, or coordinating eligibility and enrollment between multiple programs. It also creates a governing entity which excludes the Medicaid agency and in which two of the seven seats are reserved for the insurance industry but only one  for a consumer: it’s not hard to predict whose interests would be best represented.

These deficiencies raise the specter of the federal government stepping in to create a real health insurance exchange in Oklahoma – precisely the threat that spurred Gov. Fallin to accept the $54 million federal grant in the first place. It is still possible that the network could eventually meet federal standards. But for now, it looks as if Oklahoma is more intent on proving its defiance of Washington and responding to interests and fears of the insurance industry than it is in creating an insurance marketplace that would actually benefit everyday Oklahomans.

Update:  For a final update on this bill, see Where Are They Now? Bills we kept our eye on

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A couple of recent events have put these questions into dramatic relief. The first concerns a hospital provider fee, which would be assessed on participating hospitals and matched with federal dollars to pay for treating Medicaid recipients. Hospitals support the fee, since the match would generate another $223 million beyond the $153 million they pay into it, and the combined funds would then return to the hospitals as reimbursements for patient care.

The Senate passed the fee by a large, bipartisan margin. Previously the House voted for it with similarly strong support. The bill was slightly amended in the Senate, so it now heads back to the House. However, a letter by Americans for Tax Reform (ATR), the anti-tax lobbying group headed by Grover Norquist, threatens to throw a wrinkle into the debate.

Norquist said he would score support for the fee as a violation of ATR’s “no new taxes” pledge. Yet even by Norquist’s own logic, his opinion should have no bearing on the issue. This was revealed in the second recent event, an exchange between Norquist and Senator Tom Coburn.

When Coburn expressed support for eliminating ethanol subsidies and using the revenue to pay down the deficit, Norquist said he was breaking the ATR pledge. In response, Coburn asked which is more important, “The pledge to uphold your oath to the Constitution of the United States? Or a pledge from a special interest group who claims to speak for all of American conservatives, when in fact they really don’t?”

Norquist replied that when Coburn signed the pledge, he was making a promise to his constituents, not Americans for Tax Reform. Yet if that’s the case, it shouldn’t be up to Norquist to determine what is and is not a tax.

By their votes, legislators have already made clear that they view the fee as a reasonable strategy for funding Medicaid. It was carefully designed to act as a fee rather than a tax, since increasing taxes is constitutionally restricted in Oklahoma. Rather than being passed on to consumers, it would reduce hospitals’ burden by eliminating cost-shifting to cover inadequate state reimbursements for Medicaid. It would rely on federal money, but even if you believe federal spending needs to decrease, there are plenty of ways to do that without depriving hundreds of thousands of Oklahomans of accessible health care.

And make no mistake, that’s what denying the hospital provider fee would mean. About one in five Oklahomans, or  more than 700,000 people, rely on Medicaid for treatment. Without additional funds provided by the fee and match, hospitals would continue to lose money treating Medicaid patients and many could be forced to close their doors. That would put hundreds out of work and eliminate what could be the only nearby health care provider, especially in rural areas.

Only 7 of 48 Oklahoma Senators and 26 out of 101 House members have signed the AFR pledge, though Gov. Fallin and Lt.  Gov. Lamp are also signatories. These leaders now have a choice: do they represent Grover Norquist, or do they represent Oklahoma?

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