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Obamacare Medicaid Expansion Creates Expensive New Entitlement for Able-Bodied Adults While Endangering the Truly Needy

June 1, 2016 - 3:40pm CDT

By Jonathan Ingram and Jonathan Small

The Oklahoma Health Care Authority has proposed a plan to “rebalance” Medicaid eligibility in the Sooner State. But this “rebalancing” is really just an Obamacare expansion by another name.

The plan has three major components: (1) increasing taxes to raise reimbursement rates for traditional Medicaid, (2) shifting higher-income enrollees out of Medicaid in 2019, and (3) expanding Medicaid eligibility to a new class of able-bodied adults under Obamacare.

But the first two components have nothing to do with Obamacare expansion. Oklahoma policymakers can raise reimbursement rates and shift higher-income enrollees out of Medicaid even without expanding Obamacare.

Policymakers should be aware that in every other state that has finally expanded Medicaid and accessed Obamacare Medicaid dollars, the final agreement that binds future lawmakers is always a significantly watered down version of the initial promises proposed. What actually is adopted looks a lot more like what the Obama administration wants than what the respective state initially proposed.

A New Entitlement for Able-Bodied Adults

Medicaid expansion would be a bad deal for Oklahoma. Thousands of kids and adults with intellectual and developmental disabilities are sitting on Medicaid waiting lists in Oklahoma. That list is now at an all-time high, with individuals waiting an average of nearly 10 years to get the services they need.

But these aren’t the people who can expect help under OHCA’s “rebalancing” plan. The plan would create a new entitlement for hundreds of thousands of able-bodied adults, moving them to the front of the line while those on waiting lists get pushed even further to the back.

These newly-eligible adults are in their prime working years, largely have no dependent children, and have no disabilities keeping them from gainful employment. To make matters worse, more than half of new enrollees could be shifted into Medicaid and out of private insurance, according to data from the Lewin Group Health Benefits Simulation Model. This means that most of the new able-bodied adults who could be added to Medicaid under the planned expansion will come not from the ranks of the uninsured, but from employer-sponsored coverage, from the individual market, or from the Obamacare exchange. Such results aren’t conjecture; the Congressional Budget Office (CBO) estimated that 2 million people would leave the workforce if Medicaid expansion were fully implemented.

Although OHCA currently predicts that just 175,000 able-bodied adults would enroll in Medicaid expansion, its own consultants estimated that expansion would make as many as 628,000 able-bodied adults newly eligible for Medicaid. And if that weren’t bad enough, the experiences of other expansion states suggests enrollment—and ultimately costs—will soar far higher.

In states with available data, actual expansion enrollment surpassed initial projections by a whopping 91 percent. Worse yet, these states have blown past their projected maximum enrollment by an average of 73 percent. In many states, more able-bodied adults have been enrolled in Medicaid than states thought would ever even be eligible.

This has led to significant cost overruns in state after state. Ohio’s Medicaid expansion, for example, has already run $3.1 billion over budget and is expected to run a whopping $8 billion over budget by the end of 2017. In Kentucky, costs exceeded projections by $1.8 billion in just the first 18 months of operation. And in Illinois, Medicaid expansion has run roughly $1 billion over budget each and every year.

By adopting OHCA’s proposal, Oklahoma policymakers would be inviting further perpetual budget overruns and fiscal uncertainty. But worst of all, it would ultimately mean fewer dollars available for those who need them most.

Oklahoma Should Continue to Reject Obamacare, Pursue Better Reforms

If policymakers wish to increase reimbursement rates or shift higher-income enrollees out of Medicaid, they can do so without expanding Obamacare whatsoever. In fact, expanding Medicaid under Obamacare will make any other Medicaid reforms even harder to achieve.

The OHCA has consistently fought efforts by policymakers to better manage and coordinate the care of the current Medicaid population. It has fought efforts to implement enrollment integrity audits to fight abuse of the program by enrollees. In fact, OHCA employees have bragged to other states’ Medicaid staff about killing previous efforts by lawmakers to implement the use of private plans in the current Medicaid program.

Numerous options are available to lawmakers to improve the current Medicaid program without repeating the mistakes of the past and expanding Medicaid as suggested by the OHCA. These options include:

  • Decouple and adjust the various provider rates so that critical services like nursing home care, rural primary care, and rural hospital care can be preserved.
  • Implement the Medicaid reform pilot program which was passed by the legislature in 2015 and which special interests tried to repeal during the 2016 legislative session.
  • Further expand Medicaid reform efforts to other populations currently enrolled in Medicaid. Further coordination of care, use of private plans to better manage care, and increased provider managed care and capitation will save more than $80 million, based on other states’ experiences.
  • Create a state- and locally funded stabilization fund to reimburse the actual dollar shortfall for rural hospitals or nursing homes. Funding options include TSET, savings from elimination of enrollee fraud and abuse, and savings from Medicaid reform efforts.
  • Implement a significant effort to audit Medicaid rolls to ensure that only those actually eligible are enrolled. Educate the public about abuses of the program by people who drop private coverage to enroll in the program because of the incentives of the free entitlement. The state of Illinois saved more than $1 billion by implementation of this reform in its Medicaid program.
  • Local communities should increase local support and local financing of health providers that are struggling.

Oklahoma policymakers have repeatedly rejected attempts to expand Obamacare in the Sooner State. Nothing in OHCA’s plan gives lawmakers a reason to change direction.

Expanding Obamacare would put the truly needy in danger and usher in further perpetual budget crises. Oklahoma lawmakers should implement reforms to make the existing Medicaid program work, not increase government-subsidized health care dependence.

Jonathan Ingram (J.D., Southern Illinois University) is vice president of research at the Foundation for Government Accountability. He previously served as a staff writer and editor-in-chief for the Journal of Legal Medicine, an internationally ranked peer-reviewed academic journal.

Jonathan Small, CPA, serves as OCPA’s president. Previously, he served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. He holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.