Battle brewing over managed care in Oklahoma (Capitol Update)

There is a big battle brewing over Medicaid managed care in Oklahoma that will play out during the next Legislative session. It is no wonder. With what legislators say was little or no consultation, the Oklahoma Healthcare Authority (OHCA), at Gov. Kevin Stitt’s direction, issued a Request for Proposal (RFP) to private health care companies to submit bids to manage the state’s Medicaid program. Health care companies have been lobbying the Legislature, without success, for several years to adopt managed care. The Governor moved ahead with the RFP while the Legislature is out of session, and OHCA Director Kevin Corbett said the selection of the managed care contractors will be announced in early February, just as the legislature is returning to session. 

The managed care issue is made more difficult because the proposal has come at the same time the Legislature must deal with funding Medicaid expansion, which will provide health care to approximately 200,000 low-income Oklahomans between the ages of 19 and 65. Medicaid expansion was opposed by many of the state’s elected leaders, including both Gov. Stitt and former Gov. Mary Fallin. But after watching for years while state leaders turned down about $1 billion per year in federal health care funding, the people finally approved Medicaid expansion in a statewide vote. It is now the Legislature’s job to fund the 10 percent match for the funding.

There is a lot to unpack with the managed care RFP. The contracts will transfer about $7 billion in tax dollars to private health care companies to provide — on a per capita basis — doctor, hospital, and outpatient health and mental health services to qualified Medicaid recipients. According to Rep. Marcus McEntire, R-Duncan, Chair of the House Appropriations Subcommittee on Health, the RFP allows the companies to charge up to 15 percent of the outlay for administration and profits. According to Sen. Greg McCortney, R-Ada, Chair of the Senate Health and Social Services Committee, OHCA operates at between 3 percent and 4 percent overhead.

In another provision, when health care companies are able to save money for the state, they will split the savings with the state. However, if they lose money, they may come to the state for additional funding. McEntire says the idea behind managed care was to shift the risk to the private companies, but such a provision puts all the risk on the state rather than the companies.

One has to wonder what sort of track record can be used to set the per capita rate accurately based on Oklahoma’s experience. About 20 percent of the Medicaid population will be the adults 19 to 65 who never received Medicaid in Oklahoma before Medicaid expansion. And they will be receiving mental health and addiction treatment that was, before expansion, not eligible for coverage. In addition, many will likely be in relatively poor health because of lack of prior health insurance.

Another big challenge with Medicaid managed care is that federal law does not permit hospitals to receive Medicaid supplemental payments through SHOPP, a program adopted several years ago in which hospitals pay a special tax assessed for the purpose of matching Medicaid dollars. Oklahoma hospitals currently receive $1.16 billion in SHOPP funds, but under managed care they cannot receive SHOPP payments. OHCA says there is a “direct payments” provision in federal law that can pay the money in a different way, but it has not been determined how that will match up with the way hospitals are currently paid. To get that funding worked out, a bill will have to pass the legislature amending or replacing SHOPP with the direct payment provisions.   

The managed care RFP provides that a contract or any purchase order issued will be “contingent upon sufficient appropriations being made by the federal government, the Oklahoma state legislature or other appropriate government entity.” So, the bottom line is that although the governor has issued an RFP and may award contracts, they will not be effective unless funded by the legislature. 

Sen. McCortney says how the state of Oklahoma funds Medicaid and Medicaid expansion will be “the biggest fight of the year” in the next session of the Legislature. Given all the complex issues involved with both Medicaid expansion and managed care, including the budget impact, the terms of the managed care contracts and SHOPP funding, and the antipathy toward managed care by many legislators, he is certainly right.