At recent legislative hearings, the agency outlined next year’s budget situation. This year, the agency’s state funding – after budget cuts and including $33 million in additional funds that were authorized as part of the mid-year “supplemental” approved by the Legislature – is $980 million. As a result of increased enrollment and utilization, OHCA estimates that it will need $1.098 billion in state appropriations to maintain the Medicaid program in FY ’11 at its current levels. If, as is possible, the Legislature were to remove the supplemental from OHCA’s base and cut funding by an additional 10 percent, its appropriation for FY ’11 would be some $850 million. Thus, OHCA anticipates that it could be facing a shortfall for the coming year of some $250 million in state funds. With the corresponding loss of federal matching funds, the program would face the challenge of enacting total cuts of at least $1 billion.

The agency faces a very limited range of options for addressing funding shortfalls. As a result of the maintenance-of-effort provisions in the federal Recovery Act and the new federal health care law, the state is precluded from adopting more restrictive eligibility standards for Medicaid than were in effect as of July 2008.  Similarly, states participating in Medicaid must cover a comprehensive set of benefits for children and certain benefits for adults, including hospital and nursing home care.

The only options on the table, then, are the elimination of optional benefits for adults and cuts to provider reimbursement rates. To address mid-year revenue shortfalls during the current budget year, OHCA  reduced coverage of optional benefits and adopted stricter limits on access to prescription drugs and behavioral health services. It also cut provider reimbursement rates by 3.25 percent effective April 1st.

What more can OHCA do? The options it presented if faced with an additional 10 percent cut for FY ’11 included:

• Doing away with all optional adult benefits, including prescription drug coverage ($55.5 million in reduced expenditures), behavioral health services ($12.3 million), durable mental equipment ($12.4 million), dental care ($6.4 million), end state renal disease treatment (4.9 million), and others,  for a total “savings” of $92.5 million; AND
• A provider rate reduction of 19 percent ($162.5 million).

OHCA clearly acknowledges that these cuts would cause far-ranging harm. Eliminating such core medical benefits as prescription drugs, behavioral health services, diabetes supplies, and kidney dialysis treatment will severely impact the medical condition of tens of thousands of low-income adult Oklahomans without providing any real budgetary savings as more people turn to hospitals and nursing home for care.  Cuts in provider rates approaching anywhere near 19 percent would lead some health care providers to stop seeing Medicaid patients (OHCA cites a survey that found that more than two-thirds of physicians said they would stop seeing Medicaid patients if rates are cut 10 percent) and drive some practitioners, businesses, and facilities out of business entirely.  This would have a serious impact on the access to timely and appropriate health care for the entire Medicaid population, and potentially, all Oklahomans. Meanwhile, the lost jobs, income, and tax revenues that would be caused by these cuts in state spending – with their concurrent loss of $3 federal for every $1 cut in state funding- would have an enormous economic impact on businesses, communities, and local governments across the state.

Overall, major cuts to Medicaid would weaken health care for this entire population, and adults with chronic health conditions in particular, threaten the economic viability of the state’s health care infrastructure, and likely only shift costs to other lines in the state budget. But as we argued last month, “closing the budget gap through an exclusive reliance on deeper cuts is a choice, not an inevitability.” The alternative is to find other revenue sources. We continue to hope our elected leaders will make the right choice.

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The Oklahoma Legislature has made several efforts in recent years to chip away at the number of uninsured by expanding eligibility for Insure Oklahoma, a program that provides public subsidies towards the purchase of employer-sponsored coverage for employees of small businesses or a public product for those without access to employer coverage. Eligibility for Insure Oklahoma goes up to 200 percent of the federal poverty level ($44,000 for a family of four) and is available to employees of businesses with up to 250 employees.

Back in 2007, the Oklahoma Legislature passed the All Kids Act (SB 424), that aimed to expand access to health insurance coverage for children in low- and moderate-income working families.  The bill offered subsidized coverage in the Insure Oklahoma program for children 18 years of age or younger with family income between 185 percent of the federal poverty level – the current income threshold for the Medicaid program – and 300 percent .  The bill included an $8 million  set-aside from Insure Oklahoma revenues to help pay for coverage for an estimated 20,000 children. In 2007 and 2008, the Legislature also approved expansions of Insure Oklahomans to new categories of adults, including those with incomes up to 250 percent of poverty, employees of businesses up to 500 employees, and foster parents regardless of the size of their employer.

All that was left to do was for the Oklahoma Health Care Authority secure federal approval for the amendments to the state’s SoonerCare and Insure Oklahoma waivers that would allow for the expanded coverage. How long could that take, right? As it turned out, it wasn’t until this past December, after two-and-a-half long years of negotiations, discussions, revisions, and waits,  that CMS (the Centers for Medicare and Medicaid Services) finally informed OHCA that the amendments had been approved to the applications for both children and adults.

Despite the delays associated with the lengthy approval process, OHCA has indicated that it intends to implement the expansion slowly and gradually.  Beginning in October, enrollment in Insure Oklahoma will be opened to children between 185 and 200 percent of the federal poverty level whose parents are already enrolled in Insure Oklahoma. OHCA estimates that 3,000 children could gain coverage during this initial phase.  No date has been set to open up enrollment for children above 200 percent of poverty or to those with parents not enrolled in Insure Oklahoma. Similarly, OHCA has not set a timeline for expanding enrollment for adults in categories that have now received federal approval for coverage in Insure Oklahoma.

The cautious approach is explained as due to both systems implementation issues and to uncertainty about the ongoing availability of funding to cover the expansion. Insure Oklahoma is funded through a portion of the increased tobacco tax collections approved by voters in 2004. In FY ’09, OHCA was allocated $45 million for Insure Oklahoma. For several years, the program accumulated large surpluses as enrollment lagged. However, enrollment nearly doubled in 2009; with 30,314 participants as of February 2010, the program is approaching the level where annual revenues will only match expenditures on an ongoing basis. At that point, OHCA anticipates imposing a cap and waiting list on new enrollment.

The agency’s cautious approach to expanding eligibility without additional revenues is understandable, especially given the fraught fiscal outlook for the state as a whole, and the Medicaid program in particular, over the next few years.  The problem is really one only the Legislature can resolve. Expanding coverage to new categories of uninsured children and adults was the right commitment to make. Now it’s time to fund the commitment.

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SoonerCare has undergone many changes over its history. Perhaps most significantly, the program’s initial experiment of serving Medicaid recipients in the urban catchment areas of Oklahoma City, Tulsa, and Lawton through fully-capitated HMOs was abandoned at the end of 2003 after the program was unable to retain an adequate number of managed care organizations. Since then, all SoonerCare clients statewide have been served through a partially-capitated primary care physician (PCP) model, with OHCA itself assuming many of the case management and coordination functions previously contracted out to the HMOs (Medicare dual eligibles, foster care children, and other select populations remain in the traditional fee-for-service program).

The report is valuable reading for anyone looking to understand the recent history of the state’s Medicaid program. While identifying ongoing problems, Mathematica unambiguously asserts that “SoonerCare has contributed to improvements in access to care for low-income Oklahomans”.  The program is applauded for improving coverage for children (although the Legislature played a key role in expanding coverage to 185 percent of the poverty level in 1997, along with subsequent expansions),  restraining costs, growing the Medicaid provider network, and delivering customer satisfaction. OHCA itself is applauded for developing a culture of  innovation and strategic planning,  emphasizing performance monitoring and reporting, and displaying a commitment to public reporting and accountability (through such mechanisms as its monthly Fast Facts). The evaluators are more critical of OHCA’s success in collaborating with other public agencies and communicating with the Legislature.

Perhaps the most interesting finding of the evaluation (p. 16 of the Executive Summary) concerns what happened when OHCA assumed responsibility for managing the care of SoonerCare recipients who had previously been enrolled in commercial HMOs. The state, it turned out, was able to provide care at less cost with no decline in quality of care:

With sufficient resources and leadership commitment, state Medicaid agencies can manage care at lower costs than MCOs and with similar outcomes. Annual per-member costs in Oklahoma have been significantly below the national average for every year between 1996 and 2005, and in most cases below the average of states operating MCOs. Given the cost trajectory of Oklahoma’s MCO contracts, and the limited competition that existed between companies at the time that the Plus [fully-capitated managed care] program was terminated, it seems likely that SoonerCare would have been more costly to operate during the past four years had those contracts been maintained. Evidence from this evaluation suggests that provider participation and member outcomes have not been adversely affected as a result of the statewide expansion of SoonerCare Choice and termination of the MCO contracts, though we did find some evidence that preventable hospitalizations for diabetes and asthma may have increased. In states such as Oklahoma, where managed care penetration is low and turnover among MCOs is relatively high, MCOs’ key advantage — utilizing resources more flexibly – may have limited effectiveness in achieving better outcomes….The growing concentration of Medicaid managed care interest and capabilities in a relatively small number of multi-state private MCOs has prompted many states to look at state-managed PCCM, care management, and disease management programs as potential alternatives. Oklahoma has demonstrated that such programs have the potential to produce results that are as good as those produced by private MCOs, and perhaps better, if state Medicaid agencies have the necessary resources and a commitment to truly manage care.

As the national debate on health care reform heats up, with particular controversy focused on whether to provide consumers the choice of a publicly-operated product competing with private insurance plans, Oklahoma’s experience may have national relevance.

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