OKPOLICY.ORG
by Jaime Adame, Urban Tulsa Weekly
It’s number three on their short list: “Keep Our Economy Competitive.”
The slick website put together by Oklahomans for a Healthy Economy features three reasons to advocate for a change.
But they’re not seeking tax policy changes or more industry investment. Instead, they’re tying the state’s larger economy to the goal of government helping with health insurance for more low-income people in Oklahoma.
Other claims — an improved health care system and reduced insurance costs — more obviously align with a group whose key member is the Oklahoma Hospital Association.
The economic angle, however, is front and center in their advocacy effort. The group’s main website, aplanforoklahoma.org, pictures a big money sack and touts the need to grab billions in federal dollars being offered to Oklahoma through the Affordable Care Act as a means to help the state expand Medicaid.
Doing so would open the safety-net insurance program for the first time to childless working adults under 65 with incomes below 133 percent of the federal poverty level. A 5 percent portion of gross income would be disregarded from net income, effectively boosting the income limit to 138 percent of the poverty level.
For example, a childless couple earning less than $21,000 annually would be eligible for the program, known in Oklahoma as SoonerCare. (Eligibility is already broader for pregnant women and low-income parents and children.) Estimates vary, but experts put the number at roughly 200,000 people who would be newly eligible.
So far, state leaders have been more focused on developing an “Oklahoma plan,” in the words of Gov. Mary Fallin, to expand insurance coverage for the low-income uninsured. But this, too, would involve accepting federal dollars and also be expected to boost the state’s economy, according to consultants paid by the state to outline recommendations for such an “Oklahoma plan.”
“It’s not just hospitals, but physicians, pharmacies, all these providers of medical care stand to receive additional income through a Medicaid expansion or additional insurance coverage,” said Rick Snyder, the hospital association’s vice president for finance and information services.
The thinking goes that health care dollars flow to employees “who spend it at retail, who spend it on housing and a lot of other things that affect the state economy,” Snyder said.
In Oklahoma, what’s known as the Leavitt report includes a few pages of just this sort of economic analysis — in addition to a calculation of the net costs to the state if Oklahoma can develop a plan meeting with federal regulatory approval.
The Leavitt report looked at “the 10-year impact on the economy as well as the number of new jobs to be created.” Their conclusion: in a period of 10 years, between 12,062 and 15,196 jobs would be created. The more people choosing to enroll in such an Oklahoma plan, the greater the job creation, the report states.
The report not only attempts to estimate new jobs, but also what are known as indirect and induced economic effects.
“Direct effects occur when money is spent within the industry, such as the federal government paying for a hospital stay in Oklahoma,” the report states. “An indirect effect occurs when the industry that is affected directly then interacts with another industry. For example, a hospital with an increase in patient volume will purchase more laundry services from a local laundry company.”
The report continues: “Induced effects estimate how the additional money spent on the industry will change individual behavior, such as a newly hired worker earning more at the hospital and then spending more money at local retail stores.”
The authors of the Leavitt report came up with ideas on how to provide expanded coverage to the low-income uninsured, but they were also asked to do so in a way that is “financially sustainable and fiscally responsible,” Buffy Heater, director of planning and development for the Oklahoma Health Care Authority, told a group gathered for a July forum on the Leavitt report organized by the Tulsa Regional Chamber.
Even with federal funds, there would still be costs borne by the state if coverage is expanded. The report estimated direct costs at $850 million over a ten-year period from 2014-2023, based on a “medium” estimate that about 233,000 Oklahomans would enroll in some sort of Oklahoma plan (some would likely be transferring from private coverage, according to the report).
The $850 million in direct costs would be a small percentage of the total $12 billion cost in public dollars to expand coverage. And as far as the net cost to Oklahoma, the Leavitt report authors described how the $850 million number might reasonably be much, much lower.
For example, that number would likely be offset by the reduction or elimination of other programs assisting low-income Oklahomans. If this savings is factored in, the result would lower the estimated net cost to $158 million over that same 10 year period, Heater told the crowd.
It would still be a net cost, however — until the positive benefits to the larger economy get factored in. With that in mind, implementing such a program runs in the black for Oklahoma, according to the Leavitt report authors, with the state “actually saving up to $464 million dollars,” Heater said to the crowd.
The Leavitt group, based in Utah, interviewed hospital officials among other stakeholders in putting together their report, according to Patti Davis, the Oklahoma Hospital Association’s executive vice president. But the Leavitt group was paid by the state government and used its own methodology, relying on an economic modeling program known as IMPLAN.
Dave Swenson, an Iowa-based economist, described it as “a modeling structure and data package that economists use to gauge the projected consequences of an increase or decrease in some type of industrial activity.”
While Swenson had not looked at the Leavitt report or similar reports produced for other states, he wrote in an email that the model has been used, for example, to study the federal stimulus that followed the recent economic recession.
Davis and Snyder said they found no fault with the way the Leavitt report calculated the financial bottom line.
“We believe the math works,” Davis said.
For hospitals, the economic concern is obvious. When the uninsured visit an emergency room, they can’t be turned away — even if they have no means to pay for the care they receive. The industry’s business side is no doubt eager for reform resulting in a net effect of having more paying customers.
Hospitals have also been pointing out that one of the main principles of the Affordable Care Act involves reducing payments to hospitals in favor of expanding Medicaid.
“Oklahoma hospitals will still see those payment cuts, even though Oklahoma is not gearing up to bring part of that money back into the state in the form of Medicaid expansion,” Snyder said.
In Tulsa, various news outlets in May reported that St. John Health System planned layoffs. The hospital noted that it was receiving decreased revenue from federal reimbursements.
The situation may be dire for rural hospitals in Oklahoma. At the May forum, Sen. Brian Crain (R-Tulsa) described his view on how the rural hospital outlook directly relates to economic development.
“If I’m in the chamber of commerce in some rural community in Oklahoma, and I’ve got a manufacturer that is going to bring 200 jobs,” talk of great schools and a low tax rate won’t matter without a hospital, he said.
If “your response is, ‘Well, the hospital closed because we couldn’t keep it open and the doctors are 80 miles away in this other town,’ as an employer I’m going to say, ‘Well, I’m going to move to this other town that’s 80 miles away because they’ve got a doctor,” Crain told the crowd. “It is an economic development issue as much as anything else.”
When it comes to the larger affects on business, there are reasons why employers should welcome efforts to expand coverage to the uninsured, said Tiece Dempsey, a policy analyst with the Oklahoma Policy Institute.
Dempsey pointed to survey data from the U.S. Census Bureau to provide details. The restaurant and food service industry, for example, has about 23,000 uninsured workers in Oklahoma who could gain eligibility for coverage through Medicaid expansion.
It’s the most of any industry; construction is a distant second with about 14,000 such workers. Third on the list were those working in schools, with approximately 6,500 such low-income employees.
“Most of the time, it’s that they’re probably part-time workers, and so most companies don’t provide health insurance to part-time workers anyway,” Dempsey said.
Under the Affordable Care Act, employers with 50 or more full-time equivalent employees will have to make a payment to the government if they don’t offer insurance to full-time employees. These part-time workers, however, would likely not have insurance made available to them by their employer, even when this portion of the act is scheduled to take effect in 2015.
Dempsey said that by expanding health care coverage, the result would be a more reliable workforce less prone to health-related absences.
For these workers, insurance could also be key to avoiding the financial catastrophe of a serious medical problem, Dempsey noted.
“We think that there’s going to be a good sense of financial security in not having to worry about astronomical medical bills if Medicaid is expanded to cover this working population,” Dempsey said.
The Tulsa Regional Chamber has issued statements in the past backing Medicaid expansion. After the release of the Leavitt report in June, Mike Neal, president and CEO of the chamber, issued a statement reiterating the group’s support for expanding insurance coverage.
“In order for our state and the business community to remain competitive, we must find solutions to the health care problems Oklahoma faces; the health of our workforce and economy depend upon us doing so,” the statement read in part.
It continued: “Failing to create an Oklahoma Plan will undoubtedly result in increased cost shifting to businesses and untold damage to our health care infrastructure as hospitals and health systems are forced to care for the uninsured on even smaller budgets.”
But some health care academics have warned about putting something like job creation too much in the forefront of debate about health care reform.
Katherine Baicker and Amitabh Chandra, writing last year in the New England Journal of Medicine, called such a focus “misguided.”
“The goal of improving health and economic well-being does not go hand in hand with rising employment in health care,” they wrote. “It is tempting to think that rising health care employment is a boon, but if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities such as education, infrastructure, food, shelter, and retirement savings.”
With Crain and other legislators out of session and not yet fully tackling the issue, it’s unclear how much they will be swayed by the idea of broad-based economic benefits.
“There’s probably 16 to 20 other states that haven’t expanded Medicaid either, so it may just kind of be a waiting game to see if it’s going to work,” Dempsey said.
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