Medicaid Expansion: OK Policy’s Letter to Leadership

December 12th, 2012
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To:      Governor Mary Fallin

            Speaker-Elect T.W. Shannon

            President Pro Tem Brian Bingman

From: Oklahoma Policy Institute

David Blatt, Director

            Board of Directors

            Vincent LoVoi, Chair

            Don Millican

            Nancy Robertson        

            Albert ‘Kell’ Kelly

            Steve Burrage

            Susan Neal

            Linda Edmondson

Subject: Medicaid Expansion is a Good Deal for Oklahoma

Date: December 10, 2012

While we respect the Governor’s recent decision to not extend Medicaid coverage to the lowest-income Oklahoma adults, we are writing to urge that this position be reconsidered.  The practical impact of accepting these benefits would be positive for Oklahoma families, healthcare providers, businesses, and the state’s economy as a whole.

As you know, the Supreme Court this summer upheld the constitutionality of the new health care law but struck down the federal government’s authority to enforce Medicaid expansion in the states. This leaves Oklahoma, like other states, with the decision of whether to expand its Medicaid program to cover the state’s lowest-income adults, those with incomes at or below 133 percent of the federal poverty level.

Only by moving ahead with the Medicaid expansion can we ensure that taxes paid by Oklahomans to the federal government are brought back to Oklahoma and not spent only to provide health insurance to the residents of other states.

Some concern has been raised about the cost of Medicaid expansion for the state budget. But the expansion represents a very favorable deal for Oklahoma. The federal government will pay 100 per cent of the cost of newly-eligible Medicaid recipients for the first three years and ultimately 90 percent of the cost in 2020 and thereafter. Of total Medicaid expenditures from 2014 to 2020, the federal government is projected to pick up 93 percent of the cost. The Oklahoma Health Care Authority estimates the state’s share of costs for those made eligible by the Medicaid expansion and expected to enroll at $17 – $23 million annually between 2014 -2020, an amount equivalent to less than 0.5 percent of state appropriations in 2013.

In difficult budgetary times, even the modest state costs associated with Medicaid expansion may seem unaffordable. However, these costs are likely to be largely or fully offset by budget savings from transferring to Medicaid obligations currently paid for with state-only dollars by the Department of Mental Health and Substance Abuse Services and Department of Corrections. In fact, the net fiscal impact of Medicaid expansion could well be positive, even without considering additional state tax revenue generated by the multiplier effect of a large injection of federal dollars into the state’s health care system. It is also worth considering that the tobacco tax revenues currently dedicated to the Insure Oklahoma program will likely become available to offset increased state costs once the Affordable Care Act is implemented.

If, however, we choose not to expand Medicaid, low-income uninsured Oklahomans will be stuck in a ‘coverage crater’, earning too little to qualify for subsidized coverage through the health insurance exchanges that the Affordable Care Act reserves for individuals earning between 100 and 400 percent of poverty. We would be creating a system where most Oklahomans would have access to affordable employer-based or publicly-subsidized coverage, except those at the very lowest rungs of the income ladder, who are most in need of help.

Medicaid expansion provides an opportunity for significant improvements in the health of Oklahomans. Currently, almost one out of every two working-age Oklahomans with income below the federal poverty level is without health insurance. Many in this population suffer from chronic physical and mental health conditions that impede their ability to take care of themselves and their families and be productive citizens. We know from the experience in other states that expanding Medicaid coverage will lead to better access to health care services, less financial hardship, and better health outcomes. Better access to health care will bring benefit to our economy by allowing more people to work and boosting worker productivity.

Medicaid expansion will also greatly benefit hospitals, community health centers, physicians, and other medical providers across Oklahoma.  Currently, uncompensated medical care costs Oklahoma hundreds of millions of dollars annually and threatens the financial solvency of those who don’t have the choice of refusing to provide care. Ultimately, uncompensated care costs get shifted down to all Oklahomans in the form of higher health care premiums and medical bills. Expanding Medicaid coverage will substitute regular, reimbursable care for emergency and uncompensated care, strengthening our health care networks and lessening the cost-shift burden for those with private health insurance. This is especially critical for hospitals that face the phase-out of existing federal DSH (Disproportionate Share Hospital) payments that cover a portion of their uncompensated care costs.

Those who are voicing opposition to expanding Medicaid have emphasized uncertainty about whether federal obligations to pay the lion’s share of Medicaid expenditures will be met. Certainly, efforts to reduce the federal deficit will create pressure to reduce federal spending in Medicaid and other programs. Yet the health care law clearly states that the federal matching rate is to remain at 90 percent, and historically, the federal government has never failed to maintain its match rate for federal-state partnership programs. As a safeguard, Oklahoma could choose to make its participation in Medicaid expansion contingent on federal adherence to the promised match rate. Experts agree that states that choose to expand Medicaid in 2014 can reverse course later.

Finally, some contend that Medicaid is a poor quality health insurance program that should not be expanded. In reality, whatever the experience in other states, Oklahoma’s Medicaid program has done a good job of developing a broad-based provider network, offering reasonable reimbursement rates, and paying claims in a timely fashion. The program has earned national recognition for a range of initiatives that are promoting better delivery of cost-effective care.   We must continue to work to build on these successes and make Oklahoma’s Medicaid program one of the finest in the country.

We know that as leaders of Oklahoma’s executive and legislative branches, you each have a steadfast commitment to doing what is best for Oklahoma’s citizens. In this case, we trust this will lead you to  give renewed consideration to expanding Medicaid coverage for low-income adults.

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Vincent LoVoi is Managing Partner, Mimosa Tree Capital;

Don Millican is Chief Financial Officer, Kaiser-Francis Oil Company;

Nancy Robertson is Senior Vice-President, Communications, Sonic Corporation;

Albert ‘Kell’ Kelly is Chief Executive Officer & President, SpiritBank;

Steve Burrage is Board Chairman, First Bank of Antlers;

Susan Neal is Vice President, Public Affairs and Economic Development, University of Tulsa;

Linda Edmondson is a Social Worker and Community Volunteer

CLICK HERE for a PDF version of this letter