Critics decry Oklahoma governor’s Medicaid expansion numbers (Tulsa World)

by Wayne Green, Tulsa World

When she rejected federal funding to expand the state’s Medicaid system under the Affordable Care Act, Gov. Mary Fallin said buying into the program that would have extended coverage to thousands of uninsured Oklahomans could have cost the state up to $475 million through 2020.

Every penny spent on Medicaid expansion is money the state won’t be able to spend on other priorities, such as schools and roads, Fallin said.  But critics of the governor’s decision say that her estimate is greatly overstated and includes money the state still may have to pay anyway without making a single additional person eligible for health care coverage.

State participation in the Medicaid expansion would have costs, but Fallin’s critics point to figures that put the estimated gross cost of Medicaid expansion for seven years between 2014 and 2020 at $157.9 million. Federal government figures suggest the costs could be as low as $120 million – about a quarter of Fallin’s number.

Further, critics point out, Fallin’s number only considers the costs of Medicaid expansion and ignores savings the state would realize in others areas and state tax revenue increases that will result from the Affordable Care Act.  In short, the governor’s critics say her numbers don’t make any sense.

“They are the highest possible estimates based on unrealistic assumptions of how much it would cost, ignoring the off-setting savings and ignoring new revenues to the state that would grow from the Affordable Care Act,” said David Blatt, director of the Oklahoma Policy Institute. “There’s plenty of money without saying it’s going to have to be taken out of the budget for public schools or roads and bridges. It’s a disingenuous argument.”

Medicaid expansion is a key element in the Affordable Care Act’s scheme for broadening the number of Americans with health care coverage.  Under the plan, every state would raise its Medicaid eligibility standards to 133 percent of the federal poverty level in 2014. For example, using the current poverty levels, a family of four would be eligible for Medicaid if they earned up to $30,657.

People who earn more than 133 percent of poverty and who don’t get insurance through an employer would be eligible to buy private coverage through a health insurance exchange, and if they were under 400 percent of the poverty level, they would be eligible for a graduated federal subsidy.

But the U.S. Supreme Court decision that found that most of the Affordable Care Act was constitutional also determined that its Medicaid expansion mandate was unconstitutionally coercive. The decision essentially made participation in Medicaid expansion voluntary by the states.

To make Medicaid expansion attractive, the Affordable Care Act promises that the federal government will pay for 100 percent of the benefits for newly eligible clients for the first three years. After that, the states gradually would absorb a portion of the costs, capping at 10 percent in 2020.

At 10 percent, the so-called state match rate for the new patients remains significantly lower than the cost of other Medicaid patients, currently about 36 percent.  Despite that offer, Fallin – like many other GOP governors before her – opted out of Medicaid expansion.

The governor’s estimate of the state’s potential costs with Medicaid expansion were based on figures prepared by the Oklahoma Health Care Authority, the state’s Medicaid agency.

The estimate combines the authority’s estimate of the state’s share of benefit and administrative cost increases if 100 percent of those who would be made newly eligible for Medicaid signed up. It also includes the state’s benefit and administrative cost increases if 100 percent of those people who are currently eligible for Medicaid also enrolled, the so-called woodwork effect.

Both assumptions are controversial. 

While the Affordable Care Act is aimed at nearly universal coverage, most health policy experts expect a lower participation figure in an expanded Medicaid program. The nonpartisan Congressional Budget Office has used a 57 percent participation rate in estimating the fiscal impact of Medicaid expansion. Other estimates have chosen 75 percent.

Lower the participation rate and you lower the number of people the program helps, but you also lower the state’s costs.  Blatt pointed out that some people will risk paying federal tax penalties rather than enroll in health care. Others – including American Indians and people in some religions – are exempt. Others will get private insurance through other means 

Patti Davis, executive vice president of the Oklahoma Hospital Association, points out that under current Medicaid eligibility standards 17,000 eligible adults and 44,000 children are not enrolled in the program.  The Medicaid expansion would make another 200,000 adults eligible.  “We don’t think (100 percent participation) is realistic,” Davis said. “That would assume that on Jan. 1 every one of these 200,000 uninsured adults would go through the process of being enrolled.” 

Alex Weintz, spokesman for Fallin, points out that the Obama administration’s goal is universal coverage, which makes the 100 percent participation assumption appropriate.

“Clearly, there are a number of different ways to calculate costs for the state when it comes to Medicaid expansion,” he said. “Even the advocates for expansion, however, admit that yearly costs to the state will be in the tens of millions of dollars.  “That is money that will come directly out of the budget for schools, police academies, roads and bridges, and even other health services,” Weintz said. “Any way you slice it, the state of Oklahoma cannot afford this expansion.”

Blatt and David also criticize the inclusion of the “woodwork effect” costs in the estimate.

Raising the number of people eligible for Medicaid or keeping it the same has no impact on the state’s responsibility for those costs, they point out.  The combined effect of publicity over the Affordable Care Act’s individual mandate and the opening of a federally created health care exchange in the state could easily drive those costs, independent of the Medicaid decision.

“We’re on the hook for that amount, meaning if they all showed up tomorrow, I’m sure the Health Care Authority would be asking for a supplemental appropriation to pay for that additional enrollment,” said Davis. “Clearly, they are eligible today. They are eligible today at the traditional match rate.”

Including currently eligible people in the cost estimate increased the governor’s estimate by more than $267.8 million.

Take out the currently eligible Medicaid people and reduce the participation rate to 75 percent and the state’s cost of Medicaid expansion goes to $157.9 million – or $22.6 million a year, less than 0.5 percent of the authority’s current benefit budget. 

Weintz said the woodwork effect numbers were included in the estimate because that’s how the Oklahoma Health Care Authority prepared them.  “Generally speaking, Governor Fallin is interested in the real costs to the state of Oklahoma of a Medicaid expansion,” he said. “So if expanding Medicaid means more people who are currently eligible are added to the rolls at state expense, that is relevant and important from a policy perspective.” 

Blatt said the governor’s calculations also leave out savings to the state in areas such as health, mental health and corrections that are currently outside the Medicaid system but could be included with expansion. Savings to those agencies has been estimated at more than $49.4 million a year.

Also missing from the calculation would be tax revenue increases the state would see as a results of the Affordable Care Act, he said.   For example, the state has a small tax on insurance premiums. If thousands of Oklahomans begin purchasing insurance through a federal health insurance exchange, that tax revenue goes up, he said.


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