Privatized Managed Care: The Facts 

In recent months, the privatization of Oklahoma’s Medicaid program, or SoonerCare, has been hotly debated in the State Capitol and among the public with several false claims presented as facts. As the Governor and the Oklahoma Health Care Authority (OHCA) attempt to unilaterally outsource the care of 773,794 Oklahomans who are insured by Medicaid, legislators and members of the public need the facts, not political talking points. 

Privatized managed care is not supported by peer-reviewed evidence: it hasn’t been definitively linked to budget savings or improved health outcomes. In fact, it will likely cost the state money and harm many Oklahoma communities. Lawmakers have the option and the responsibility to protect Oklahomans’ health care and stop this reckless change. 

Managed care will cost the state money….  

Oklahoma will likely see increased costs as a result of privatizing the state’s Medicaid program. Our analysis suggests that if Oklahoma’s per-member costs increased to the average of surrounding, non-expansion states that use managed care, it could cost the state an extra $716 million annually. Other fiscal implications have come to light in other states, as well; the Ohio Attorney General has sued Centene — one of the managed care organizations (MCOs) that was awarded an Oklahoma contract — for an “elaborate scheme to maximize profits” at taxpayers’ expense.

Increases in Medicaid administrative costs pose another threat to the state budget. The OHCA currently spends about four percent on overhead, but MCOs can spend up to 15 percent on administration and profits. In 2020, Centene reported $1.8 billion in profits, largely from taxpayer-funded medical programs. Our analysis indicates that increasing the state’s administrative costs to 15 percent without making up for that increase elsewhere could cost the state another $135 million

Lastly, if managed care costs more than the OHCA’s projections, the state will be contractually obligated to share in the losses and will have to identify increased funding sources to cover that cost. 

… and hurt patients in the process.     

Privatized managed care will make it more difficult for many patients to see their doctors, and it won’t improve the state’s health outcomes. Managed care has already failed in Oklahoma, with little to suggest that this time is different. At a recent virtual town hall, when asked what safeguards are in place this time, the OHCA stated that some staff will “transition into an oversight position.” This is hardly encouraging, as specific concerns remain unanswered. 

The Governor and the OHCA have falsely claimed that managed care is necessary to improve health outcomes in Oklahoma. In reality, seven of the 10 states with the best health outcomes and seven of the states with the worst health outcomes use managed care, suggesting that this argument is either based on unfounded assumptions or is being used to intentionally misguide stakeholders. Tennessee, for example, outsourced its Medicaid program in 1994, yet still sits firmly in the bottom 10 states for health measures. Additionally, managed care has caused “significant problems with the quality of care,” according to a recent study by the Government Accountability Office.

Proponents have said that privatization will increase equity in Oklahoma. Theoretically, MCOs have more flexibility to spend funds on addressing social determinants of health, but research shows that MCOs have a limited ability to address this issue in practice and would likely refer patients to already overburdened service agencies. Additionally, a decrease in transparency and an increase in administrative barriers will disproportionately harm people of color, nullifying any potential equity arguments. Moreover, the state holds the power to address health disparities and prioritize equity right now, but has historically failed to do so. Only about 10-20 percent of health outcomes are attributed to medical care; the rest come from external factors. A true prioritization of equity would mean increasing the state’s investment not only in health, but also in economic well-being, food insecurity, and access to mental health care.  

Lastly, despite OHCA’s claims that provider rates will be protected, providers will undoubtedly see rate cuts that would financially jeopardize their ability to deliver care. Oklahoma’s managed care contracts guarantee minimum payment rates only to essential community providers. In practice, providers are beginning to see the financial implications: one hospital CEO has stated that he’s already received contracts with rate cuts, and durable medical equipment providers are seeing contracts offering only 70 percent of current rates. Many rural hospitals and other providers depend on the consistency and the amount of Medicaid payments to keep their doors open, and any cut in their Medicaid rates may force many providers out of business. This will cause significant patient access issues in the short-term, particularly in rural areas, and it will also impair the state’s provider networks for years to come. Even if the state returns to an in-house management model in future years, the damage will be long-lasting: the providers will no longer be there, and they won’t be able to quickly re-enter these markets. 

The Legislature holds the power to stop managed care implementation 

The managed care contracts clearly state that contracts will become void in the case of a lack of funding or necessary authority. The Legislature still has a chance to protect the care of Oklahomans. Senate Bill 131, which passed the House on April 20, would direct the OHCA to create an internal managed care system, rather than outsourcing the entire program. In short, it would allow the state to realize the potential benefits of managing care without diving head-first into a $2 billion experiment. SB 131 will now head back to the Senate for passage of the new language. 

In response to this bill’s passage out of the House, the Governor released a statement, in which he relied on political rhetoric and false claims to demonize Oklahoma’s historically efficient, bipartisan-supported Medicaid program. In reality, SB 131 would accomplish what he claims he set out to do when he began pushing for managed care — except it would do it without funneling taxpayer dollars to out-of-state corporations. By approving SB 131, lawmakers can protect the health and tax dollars of Oklahomans. 

Additional resources 

ABOUT THE AUTHOR

Emma Morris serves as the Health Care and Revenue Policy Analyst at OK Policy. She graduated from the University of Oklahoma in fall 2019 with dual degrees in Women’s and Gender Studies, and Public and Nonprofit Administration. She is an alumnus of OK Policy’s Oklahoma Summer Policy Institute.

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