Has SoonerCare Achieved Its Objectives by OCPA

December 2000 No. 00-4

OCPA Policy Paper A Report from the Oklahoma Council of Public Affairs

Has SoonerCare Achieved Its Objectives? A Five-Year Checkup by Merrill Matthews, Jr., Ph.D. and Glenn P. Dewberry, Jr., M.D.

Executive Summary SoonerCare has been in operation for five years, and recent reports of budget shortfalls and allegations of nursing home infractions make it imperative that we ask whether low-income Oklahomans are getting quality health care and whether Oklahoma taxpayers are getting a good program for their tax dollars. This five-year checkup examines whether SoonerCare has achieved its stated objectives, and offers policy prescriptions for building an efficient and effective health care system.

Guarantee of Quality Scholarship The Oklahoma Council of Public Affairs, Inc. is committed to delivering the highest quality and most reliable research on Oklahoma issues. OCPA guarantees that all original factual data are true and correct and that information attributed to other sources is accurately represented. OCPA encourages rigorous critique of its research. If the accuracy of any material fact or reference to an independent source is questioned and brought to OCPAÂ&#x2019;s attention with supporting evidence, OCPA will respond in writing. If an error exists, it will be noted in an errata sheet that will accompany all subsequent distribution of the publication, which constitutes the complete and final remedy under this guarantee.

Table of Contents Introduction ..................................................................................................................................................... 3 What Is the Philosophy Behind SoonerCare? ............................................................................................. 3 The Structure of American Health Care .................................................................................................... 3 The Philosophy of Managed Competition ................................................................................................ 3 The Philosophy of SoonerCare ................................................................................................................... 4 What Were SoonerCare s Objectives? ......................................................................................................... 4 Objectives of SoonerCare ........................................................................................................................... 4 Implementation of SoonerCare .................................................................................................................. 4 Achieving the Objectives ............................................................................................................................. 5 Why Was SoonerCare Considered Better Than Medicaid? ...................................................................... 5 Growth in the Medicaid Program ............................................................................................................... 5 Medicaid in Oklahoma ............................................................................................................................... 6 Has SoonerCare Increased Access to Health Coverage for Low-Income Families? .............................. 7 Cutbacks Mean Decreased Access ........................................................................................................... 7 Has SoonerCare Lowered Medicaid Costs Through Managed Care? ................................................... 8 Does Managed Care Save Money? ........................................................................................................... 8 Does Managed Competition Work? ........................................................................................................... 8 How Do SoonerCare Rates Compare with Other States? ....................................................................... 9 The Medicaid Growth Index ..................................................................................................................... 10 Has SoonerCare Provided Access to Quality Services? .......................................................................... 11 Shifting Responsibility But Not Money .................................................................................................... 11 TennCare: An Example Which Should Not Be Imitated ........................................................................ 11 Quality of Care in Oklahoma ................................................................................................................... 12 Has SoonerCare Increased Patient Choice? ............................................................................................ 12 Are Medicaid Participants Demanding Choice? .................................................................................... 13 Are Oklahomans Getting Their Money s Worth? ...................................................................................... 13 What Needs To Be Done? ............................................................................................................................ 13 State Reform: Maintain Strong Economic Growth ................................................................................. 14 State Reform: Keep Benefits Low and Affordable .................................................................................. 14 State Reform: Continue Welfare Reform ................................................................................................. 14 State Reform: Maintain the Safety Net .................................................................................................... 15 State Reform: Review the Oklahoma Health Care Authority ................................................................ 15 Federal and State Reform: Don t Impose Mandates on Health Insurance ......................................... 15 Federal Reform: Tax Fairness ................................................................................................................... 16 Federal Reform: Reform Medical Savings Accounts.............................................................................. 16 Conclusion ..................................................................................................................................................... 17

Introduction The year was 1992, and health care reform became the most important public policy issue in the country. Then-presidential candidate Bill Clinton pointed to the 35 million Americans without health insurance and decried it as a national crisis. The media began to carry stories about health insurance and the uninsured. A national dialogue ensued. By the time President-elect Clinton was inaugurated, health care reform was perceived as a national mandate. In Washington, D.C., the debate over comprehensive health care reform lasted for two years, but died with the failure of the Clinton plan to pass Congress in the fall of 1994. Since then, the administration has been successfully pushing incremental reform. The progress of health care reform in the states was very different. Concerned that Congress would not pass any reform plan and, in the case of some politicians, spurred by the desire to be perceived as leaders of a popular political issue states began to consider their own reform proposals. Several eventually passed a limited version of the Clinton health plan, though many of them were later forced to scale back or rescind the legislation.1 Oklahoma joined the bandwagon under thenGov. David Walters with the creation of the Commission on Oklahoma Health Care in 1992, which was largely funded by an $800,000 grant from the Robert Wood Johnson Foundation. The purpose of the Commission was to look at the state s health care system, the problem of the uninsured, listen to the needs and comments of Oklahomans and propose solutions to improve health care coverage, financing and delivery. In 1994, the Legislature created the Oklahoma Health Care Authority (OHCA), a politically insulated, technically competent mechanism charged with implementing The Oklahoma Family Choice Health Plan. 2 Although the Family Choice Health Plan was an ambitious reform proposal modeled after Clinton s, it would start slow by creating SoonerCare, the program that would move urban Medicaid beneficiaries and then the rural poor on

Medicaid into managed care. SoonerCare has been in operation for five years, and recent reports of budget shortfalls and allegations of nursing home infractions make it imperative that we ask whether low-income Oklahomans are getting quality health care and whether Oklahoma taxpayers are getting a good program for their tax dollars. Has SoonerCare lived up to the philosophy behind its creation and met the claims of its proponents both then and now? What Is the Philosophy Behind SoonerCare? SoonerCare is the product of a larger philosophical belief that an efficient health care system must be managed from the top down. The Structure of American Health Care. Historically, the American health care system has been characterized by individuals (patients, insurers, doctors and other health care providers) making individual decisions based upon their own needs and values and with the best available information. Indeed, the term system might be a misnomer, since American health care has had little or no formal organization or central planning. In fact, it is doubtful that American doctors and other health care providers would have tolerated such control as recently as 10 or 20 years ago. The Philosophy of Managed Competition. By contrast, health policy experts who were pushing managed care as part of a larger structural reform, believed the health care system needed to be organized and rationalized, operating under the auspices of some health care authority whose job it was to oversee the system. This approach came to be known as managed competition, a kind of middle-of-the-road solution meant to harness the cost-reducing forces of competition while retaining the stability that comes from management and oversight.3 As an aside, it is interesting to note how quickly people latched on to the philosophy of managed competition. Although there is no central authority controlling the delivery of, say, the news, no one says it is inefficient to have several stations, radio and television, delivering the same news to a given set of people. News organizations compete vigor-

ously and make individual decisions about what to philosophy of managed competition. That broader include and exclude in a broadcast. Yet the public reform has been set aside at least for now but gets the news it needs efficiently and affordably. applying the vision of managed competition to Similarly, there is no controlling authority over SoonerCare remains intact. the food system. Farmers and ranchers make independent decisions, so do food processors and What Were SoonerCare s Objectives? grocers. No one in city or state government has to In January 1995 the Oklahoma Health Care oversee the supermarkets to make sure there is Authority submitted its proposal (known as an food on the shelves and that consumers can get 1115a waiver) for establishing SoonerCare to the good food at reasonable prices. Both systems work Health Care Financing Administration (HCFA), the very well without an authority guiding them from federal agency that oversees Medicare and Medicthe top-down. aid.4 Objectives of SoonerCare. According to the But for some reason, the early 1990s saw a OHCA, SoonerCare had six primary objectives:5 growing acceptance of the notion that health care Improving access to preventive services, primary was different and could not continue to function like care and early prenatal care for Oklahoma s almost every other sector of the economy. And so Title XIX (i.e., Medicaid) population. the Oklahoma Health Care Authority and Ensuring that every Title XIX beneficiary is able SoonerCare were born. to choose a primary care The Philosophy of provider who will serve SoonerCare. SoonerCare is the product of a larger as his or her family SoonerCare was an philosophical belief that an efficient physician and be reattempt to bring that tophealth care system must be managed sponsible for providing down oversight and from the top down. all basic medical sercontrol to Oklahoma s vices. Medicaid program, the Building managed care capacity in Oklahoma s federal-state health insurance program for the rural communities, and testing various alternapoor. By the early 1990s, states were experiencing tives for creating this capacity in order to identify an explosion in Medicaid spending primarily the most effective model(s). because of an increase in long-term care costs but More closely aligning rural providers with their also because Congress expanded the program to urban counterparts, so the rural Title XIX benefiinclude more pregnant women and low-income ciaries are better able to obtain access to needed children. In addition, Medicaid was subject to specialty/referral services. extensive levels of fraud especially in large inner Enhancing the ability of rural communities to city areas. As a result, most states were looking for retain existing providers and attract new ones. some program or method to regain control over Instilling a greater degree of budget predictabiltheir exploding Medicaid budgets. ity into Oklahoma s Title XIX program, by moving Managed care presented itself as a solution that from a fee-for-service system to one based on the would provide comprehensive care for less money concept of pre-payment. by controlling utilization. Thus, even states that Implementation of SoonerCare. SoonerCare hadn t bought into the philosophy of managed was to be implemented in three phases.6 competition began shifting their Medicaid popula Phase I: The state would enroll participants of the tion into managed care. One difference between Aid to Families with Dependent Children (AFDC) Oklahoma and many of the other states was that in and AFDC-related populations in managed care, Oklahoma, the shift to managed care was only the first in the urban areas and then in rural areas.7 first step in a bigger scheme meant to fundamenThe SoonerCare program targeting three urban tally reform the health care system based on the

areas Oklahoma City, Tulsa and Lawton went tition at least three HMOs need to be serving the into effect in July 1995. SoonerCare Choice, same population base, concentrations only reachwhich attempted to extend managed care to able in Oklahoma City, Tulsa and Lawton. As five Oklahoma s rural poor, began in October 1996. years experience has demonstrated, while the state Phase II: The state would enroll non-institutionalmight be able to extend managed care to most of ized aged, blind and disabled populations. the rural population, achieving managed competiImplementation was postponed for a few years, tion has been impossible. Currently, the urban finally going into effect in July 1999. areas have only two HMOs serving the same popu Phase III: The state would incorporate long-term lation.12 While the state recognized this problem at the care recipients (i.e., those in nursing homes) and outset, it did not alter its strategy and proposed a those with chronic mental illness into programs series of partial capitation models, ranging from a designed to meet their needs. The mental illness limited option covering primary care physician portion began in July 1999, while the long-term services only to one that capitates a network for all care portion has been postponed until July 2001. services except inpatient hospital care. 13 However, Achieving the Objectives. Like other advocates the state is still struggling to find ways to adof managed competition, the OHCA believed it equately finance this could achieve portion of SoonerCare. SoonerCare s objectives Recent trends make it very difficult to by contracting with a claim that SoonerCare has increased Why Was SoonerCare number of health mainteaccess to care. Indeed, the program Considered Better nance organizations may be reducing access to the point Than Medicaid? (HMOs), which would that the health of many low-income Medicaid was created compete against each Oklahomans may be harmed. in 1965, along with other for SoonerCare Medicare, the federal participants. Five HMOs health insurance pro four each operating in gram for seniors, as a fee-for-service insurance Oklahoma City and Tulsa and three in Lawton 8 program, meaning that doctors, hospitals and other won initial bids. For its part, the state would pay HMOs a health care providers were reimbursed based on capitated, or fixed, sum for each participant.9 the service they provided. However, spending in The competition for patients was supposed to keep both programs soon exceeded projections, forcing 10 the quality of care high and prices low. politicians, both at the federal level and, with However, shifting the state s Medicaid population respect to Medicaid, at the state level, to look for into managed care would not be easy, in large part ways to control spending. 11 because of Oklahoma s rural makeup. Growth in the Medicaid Program. By 1997, At the time of SoonerCare s creation, 70 of the Medicaid covered 40.6 million people low-income state s 77 counties, which held more than half the children, adults, seniors and disabled individuals Medicaid population, were rural. and spent a total of $167.6 billion dollars, about Nearly three out of every four Oklahomans lived $4,128 per recipient annually. Although Medicaid in a Health Professional Shortage Area or Medihad been growing since its inception, Congress cally Underserved Area. expanded the program significantly in the late The rural aspect of Oklahoma creates a real 1980s, forcing states to spend even more. As problem for managed competition. The nature of Figures 1a and 1b show, Medicaid enrollment grew HMOs and the capitation payment system require a by 40 percent between 1990 and 1997, while total concentration of people incompatible with rural Medicaid spending grew by more than 125 perpopulations. Moreover, in order to promote compecent.14 Indeed, for some states, Medicaid was the

wanting to save face and avoid any political fallout from admitting they made a mistake, have felt compelled to defend their reform programs publicly often ignoring all evidence to the contrary while subtly trying to reform their reforms. Indeed, the problem in Tennessee is so bad that Gov. Don Sundquist, who inherited the problem from former-Gov. Ned McWherter, has been pushing for the creation of a state income tax, in addition to the current state sales tax, in order to pay for TennCare, Tennessee s 1993 foray into solving the state s problem of Medicaid and the uninsured.16 Medicaid in Oklahoma. In the early 1990s, Medicaid was growing even faster in Oklahoma than the national average. According to a paper prepared by the governor s staff on the problems facing the state, In 1991, federal and state/local expenditures for Medicaid benefits amounted to $96.5 billion, an increase of 34.4 percent from the 1990 level. 17 Given that size of increase, it was understandable that Oklahoma and other states look into their Medicaid programs to see if there were reform options that could lower costs. The evidence suggests that between 1992 and 1996, Oklahoma was getting Medicaid spending under control, while still providing adequate access and coverage for lowincome Oklahomans. For example: A 1995 report card on Oklahoma s Medicaid system by economist Richard Vedder et al. gave the system a grade of A-.18 A separate analysis by Michael Lapolla of the Center for Health Policy Research found that the state s uninsured rate was declining and that employment-based coverage was rising, largely as a result of improved economic activity.19 What is unclear from the Vedder study is whether the reduction in Medicaid spending was a result of trimming waste and inefficiency or arbitrary cuts. Arbitrary cuts over a sustained period of time will eventually have a negative impact. As Figure 2 shows, by 1992 Medicaid growth in Oklahoma slowed significantly and continued very modest increases until 1997, the first full year after SoonerCare went into effect. The recognition of past growth, the possibility of

Figure 1a

1990 28.9

1991 32.3

1992 35.8

1993 38.8

1994 40.9

1995 42.7

1996 41.3

1997 40.6

U.S. Medicaid Enrollment (in millions), 1990-1997 Source: Urban Institute data, based on HCFA data.

Figure 1b

1990 73.7

1991 92.7

1992 119.2

1993 132.3

1994 142.7

1995 157.4

1996 161.0

1997 167.6

Total Medicaid Spending (in billions), 1990-1997 Source: Urban Institute data, based on HCFA data.

fastest growing part of the state budget, reaching 25 percent of total state expenditures. As can be seen in the figures, while Medicaid enrollment and spending both grew rapidly in the early 1990s an average of 27.1 percent annually between 1991 and 1993 that growth began to subside, growing only 2.3 percent in 1996 and 4.1 percent in 1997.15 Thus some states that passed health care legislation in the early 1990s based on then-current Medicaid projections vastly overestimated future growth. Unfortunately, many were locked into programs that required levels of spending that would have been reasonable had Medicaid s growth spurt continued, but in reality were exorbitantly high given the decline in Medicaid enrollment. That development has created a huge political problem for several states. Many state legislators,

continued growth in the future and the desire to get on the health care reform bandwagon in the early 1990s made Medicaid reform attractive to legislators in Oklahoma as well as many other states. Again, SoonerCare s basic objectives included:20 Increasing access to health coverage for lowincome Oklahomans; Lowering Medicaid costs by placing lowincome Oklahomans in managed care and relying on managed competition to keep costs down; Providing access to quality health care services, especially primary and preventive care; Expanding choice for all participants. Has SoonerCare achieved these basic objectives? Let s take a closer look.

to cut a lot more than the state actually saves because it doesn t pay the full price. Growth of Medicaid recipients in Oklahoma has remained relatively stable, with an average annual increase between 1992 and 1998 of 4.2 percent.22 There was a slight decrease in 1996 and 1997, as a strong economy and welfare reform began to reduce the number of people on cash assistance. Significantly, a 1996 analysis of state Medicaid programs found that only 14 percent of those eligible for Medicaid were not enrolled.23 But those declines evaporated with the passage of the federal Children s Health Insurance Program (S-CHIP) in 1997, which was intended to bring coverage to low-income children not qualified for Medicaid. Oklahoma chose to merge S-CHIP with SoonerCare, which may have exacerbated SoonerCare s growing financial problems. Thus, 1998 saw a significant increase in the number of people on the Medicaid rolls.24 Cutbacks Mean Decreased Access. The rapid growth that began with the implementation of SCHIP put the state in a financial strain, and lawmakers have been looking for ways to cut back. Tight state budgets recently have forced SoonerCare to cut its rolls by 4,000 mothers and outpatient services to 10,500 children and adults who receive mental health care through Medic-

Has SoonerCare Increased Access to Health Coverage for Low-Income Families? Expanding Medicaid is very appealing to state legislators because of federal-state matching funds. When Oklahoma spends a dollar on Medicaid, the federal government pays about 70 cents of it, with the state picking up the rest.21 That means politicians can expand health insurance for lowincome families and gain all of the political benefit that comes from providing a service to the voters, but without having to pay the full financial costs. Conversely, if they cut Medicaid benefits, they have

Figure 2

FY 92 $1,117,964,734

FY 93 FY 94 $1,129,651,107 $1,141,193,875

FY 95 $1,153,814,001

FY 96 FY 97 FY 98 $1,211,760,860 $1,361,065,174 $1,464,160,351

Medicaid Expenditures in Oklahoma

FY 99* $1,411,776,000

FY 00* $1,508,837,000 *Estimated

Source: Brian Crow and Willie Marie Scott, Comparative Data Report on Medicaid, A Report Submitted to the Fiscal Affairs and Governmental Operations Committee, Southern Legislative Conference, Council of State Governments, October 23-27, 1999, p. 97.

paying under fee-for-service Medicaid.27 And the reason, they contended, was the shift to managed care. Does Managed Care Save Money? While studies have shown that managed care can save states money, especially in a program as chronically inefficient as Medicaid, those savings have a limit. In both the public and private sectors, there appears to be a one-time savings of between 10 percent and 15 percent when shifting to managed care.28 But after that, costs begin to grow at relatively the same rate as under traditional insurance. Although many states have managed to squeeze additional savings out of Medicaid managed care, that is in large part because they are arbitrarily cutting reimbursement rates below providers costs. As a result, some of the largest and most respected HMOs have left the Medicaid managed care market, often leaving states no other option than to turn to younger or start-up HMOs that serve only Medicaid patients. However, many of these HMOs have run into financial problems and many simply do not have the experience necessary to manage the Medicaid caseload.29 To make matters worse, many of the HMOs operating within Oklahoma were already losing money by the time SoonerCare was implemented, which only exacerbated the problem.30 Does Managed Competition Work? Thus, managed care may be able to hold down some costs, but there is a limit. Cuts below that limit will begin to threaten the availability of services and the quality of care. However, as already mentioned, SoonerCare was meant to be more than managed care: it was meant to be managed competition. Like the Clinton health care plan, the state would offer a flat amount of money for each enrollee, and managed care companies would compete against each other for customers, keeping prices low and quality high. But lawmakers failed to understand just how insurance markets work. A fundamental rule of the marketplace is that you cannot foster competition when the price a consumer is willing to pay is set too low. Companies don t compete with each other to win a moneylosing contract. Yet that is what SoonerCare has

Figure 3

FY 92 360,039

FY 93 386,531

FY 94 390,628

FY 95 393,613

FY 96 358,121

FY 97 315,801

FY 98 459,579

Medicaid Growth in Oklahoma

aid.25 In addition, in November 1999 the Oklahoma Health Care Authority voted to cut the Optional Prescription Drug and Medically Needy programs in an effort to reconcile a $7.9 million budget shortfall, though it reinstated the program a few months later.26 Such trends make it very difficult to claim that SoonerCare has increased access to care. Indeed, the program may be reducing access to the point that the health of many low-income Oklahomans may be harmed. The forced reductions in an effort to balance the budget raise an important question: wasn t the shift to managed care supposed to solve these budgetary problems by being more cost-effective and saving the state so much money that legislators wouldn t have to make such cuts? Has SoonerCare Lowered Medicaid Costs Through Managed Care? Gov. Walters and his supporters sold the public on health care reform in part by claiming that managed care would save the system so much money that it would eventually be able to move past Medicaid and look at covering the uninsured and uninsurables. For example, shortly after the implementation of SoonerCare, OHCA officials claimed the program was saving the state $17 million a year, or 13.8 percent of what it had been

become. It is probably fair to say that the only reason some of the managed care organizations (MCOs) have remained as long as they have is a sense of obligation to provide health care.31 But even that obligation has its limit if capitation and reimbursement rates get too low. Of course, one solution would be to raise reimbursement rates (which policymakers did in 2000 with HB 2019). But there are reasons why politicians may want to (or have to) avoid that approach. The state determines what the capitation rate will be, and that decision can be guided more by politics than by good patient care. It certainly has in Oklahoma. Part of the political problem is other claims on state money. For example, even if health care providers are in desperate need of a reimbursement increase, but public school teachers are able to get more attention or make a more compelling case for an increase in education dollars, additional state money may go to the teachers rather than the doctors and hospitals. While that competition for government funds is part of the political process, it also politicizes the health care system and forces doctors and other health care providers to practice politics rather than practicing medicine. Another problem is saving political face. SoonerCare was promoted as a way to provide better care and save money. If politicians raise reimbursement rates above a predetermined level, they become targets of political critics who say that proponents lied when selling the program. Politically, it is much easier to keep the reimbursement rates low, say they are adequate and claim that complaints are only coming from greedy doctors and health plans. How Do SoonerCare Rates Compare with Other States? Some important scholarly analyses have been made comparing what states spend on Medicaid services. For example, a report from the Washington, D.C.-based Urban Institute compared Medicaid spending for selected services in all 50 states. According to the report, between 1993 and 1998:32 Average Medicaid expenditures for all services declined in Oklahoma by 3.46 percent, from

$153.07 to $147.77, compared to an average national increase of 4.57 percent. Payments for primary care physicians services declined by 21.69 percent in the fee-for-service program, from $32.55 to $25.49, compared to an average national increase of 17.44 percent. Indeed, only one state (West Virginia) had a larger decline, 21.83 percent. And payments for obstetric care remained unchanged at $736.18, compared to an average national increase of 7.46 percent. An even more revealing study comes from an annual comparative survey prepared by the Southern Legislative Conference (SLC) of the Council of State Governments. According to the SLC, between 1992 and 1998 average payments per Oklahoma Medicaid recipient fell by an average annual rate of:33 4.0 percent for general hospitals; 5.8 percent for mental hospitals; 1.3 percent for physician services; and 1.2 percent for early and periodic screening, diagnosis and treatment. Those declines were annual, not total for 1992 to 1998. Although the state was spending more on Medicaid in 1998 than 1992 $1.3 billion vs. $1 billion (excluding DSH and pharmacy rebates) it spent less per recipient in 1998 than it spent in 1992 in all four categories listed above. [See Table 1.] That is not the whole story, of course; outlays for prescription drugs per recipient increased by an average Table 1 Average Medicaid Spending Per Recipient in Oklahoma by Selected Types of Service, 1992 and 1998 1992

1998

General Hospitals

$3,352.00

$2,626.05

Mental Hospitals

$24,303.30

$16,945.54

$286.48

$264.80

$91.11

$84.50

Physician Services Early Screening and Treatment

being asked to provide excellent care for less money in 1998 than they received in 1992. When Oklahoma is compared to the other 15 states in the Southern Legislative Conference, it becomes clear just how stark the contrast is. According to the SLC, Oklahoma s average payment per recipient is the lowest or almost the lowest in all six categories the study compared. [See Table 2.] And that was with a total enrollment increase of 28 percent from over the same time period. While variations in state reporting could slightly affect some figures, clearly there is evidence that suggests that Oklahoma health care providers are being short-changed when compared to many other southern states. The Medicaid Growth Index. Even more telling is the Southern Legislative Conference s Medicaid Growth Index, an index created in order to rank the southern states that successfully reduced unit costs (payments per recipient adjusted for inflation) between 1992 and 1998. 34 As Figure 4 shows: 10 of the 16 SLC states experienced an increase in the growth index, while six states experienced a decrease. Oklahoma received a negative rating 3.6 times greater than that of Georgia, the state with the next largest negative rating, and 9 times that of Louisiana, the state with the highest positive rating.

Table 2 Average Payment Per Recipient for Selected Types of Service: OK Compared to the SLC Average and the State with the Highest Reimbursement Per Recipient (1998) OK

SLC

Highest Reimbursement

All Services

$2,832

$3,030

$4,433 (MD)

Hospital Inpatient

$2,626

$3,848

$7,681 (MD)

$265

$369

$490 (MS)

$51,535

$59,229

$87,871 (MD)

Skilled and $11,291 Intermediate Nursing Facilities

$15,309

$22,294 (WV)

$553

$779 (WV)

Physician Services ICF/MR Facilities

Total Medicaid Expenditures Per Capita

$437

annual rate of 13.6 percent. Such declines in many types of service would likely have had a negative impact on providers. Doctors and hospitals could do more in 1998 than they could in 1992. They have more expenses, higher administrative costs to deal with the growing body of paperwork, and of course there is general inflation, which is typically higher in health care than in other sectors of the economy. Yet they are Figure 4

LA 109.43

MS 109.41

WV 65.34

KY 56.18

TX 44.28

AL 36.13

MO 31.54

FL 31.19

NC 5.74

SC 0.86

AR SLC MD VA TN GA OK -18.43 -28.02* -100.40 -128.61 -132.30 -240.33 -863.63

Medicaid Growth Index for Southern States (1992-1998)

* Average, Southern Legislative Conference Source: Brian Crow and Willie Marie Scott, Comparative Data Report on Medicaid, A Report Submitted to the Fiscal Affairs and Governmental Operations Committee, Southern Legislative Conference, Council of State Governments, October 23-27, 1999, p. xxviii.

Thus it seems very clear that while Oklahoma has been very successful in holding down Medicaid costs, it is not because SoonerCare is well managed. Medicaid costs have remained low because the state has been significantly underpaying providers at least in comparison with other states.

ing capitation and reimbursement rates artificially low, legislators can transfer funds to budget items that are more politically appealing while still holding Medicaid MCOs to their promise of providing comprehensive, quality care. This trend can be seen in Oklahoma in a recent debate over dentists reimbursement under Has SoonerCare Provided Access to Quality SoonerCare. Dentists providing care for up to Services? 77,000 patients complained that they were not When government provides or finances health getting enough money under their capitated concare services, it creates a tension that may undertract. State Senator Angela Monson responded mine the availability and quality of care. The that the money went to the health care authority, as reason is that health care is forced to compete with it was supposed to. The health care authority other important claims on government funds such argued that it does not set rates in the HMO conas education, the criminal justice system and social tract. And the HMO argued that the dentists services. As a result, there is never enough money agreed to the rates. Thus, dentists are bearing all to fund any program as much as proponents would of the risk but not much money, yet no one seems like. Moreover, the decision on which programs get willing to accept responsibility for the problem.35 As a result, more and funded and how much is more MCOs are canceloften determined more by Though Oklahoma has been very ing their contracts and which group has the most successful in holding down Medicaid dropping out of the political power, rather costs, it is not because SoonerCare Medicaid program both than a program s needs is well managed. Medicaid costs in Oklahoma and in other and merits. have remained low because the state states and it is becomWith regard to health has been significantly underpaying ing harder and harder to care, the poor are often a providers. find replacements. In silent minority and addition, an increasing legislators know it. It is number of health care providers are dropping out often hard to know whether a poor patient would of the system or refusing to accept new Medicaid have gotten more or different care had the patient patients. had money or private insurance. Thus, they can be TennCare: An Example Which Should Not Be ignored with little or no political fallout. Imitated. Tennessee was one of the first states to Shifting Responsibility But Not Money. One of adopt health insurance reform legislation, passing the great benefits of managed care from the legisTennCare in 1993. Lawmakers goal in creating lators viewpoint is that they can pass the responsiTennCare was to provide one health insurance bility for ensuring the quality of health care for the safety net to cover anyone who was poor or uninpoor to the managed care organizations that sured for less money than the state would have contract with the state, which then pass the responspent on Medicaid. To achieve its goal, the state of sibility and risk on to the providers. Under the Tennessee applied for and received a five-year traditional fee-for-service Medicaid system, by federal waiver (recently getting a three-year extencontrast, that responsibility seemed to fall on the sion) from HCFA that permitted the state to leave legislators and the state s health and human the Medicaid program and use that money to fund services department. TennCare. However, state legislators across the country TennCare proponents argued that the state increasingly see Medicaid managed care prowould save so much money by shifting all Medicaid grams as a source of budgetary savings. By keep-

recipients into managed care, it could also afford trained nurses. For example, lower reimbursement to cover all the state s uninsured at no extra cost. rates for hospitals drove the Legislature to pass The ambitious nature of TennCare has flooded Senate Bill 537, which created the position of the program s rolls so that 24 percent of unlicensed certified personnel to work in hospiTennessee s population is in TennCare. In additals, doing some of the functions that trained tion, 28 states including Oklahoma have nurses have done.38 Lesser-trained employees will likely cost less, helping the hospitals continue to adopted some form of high-risk pool as a way to operate. But are patients getting the same quality address the needs of their uninsurable populations. of care? But TennCare distorted this solution as well. TenAnother problem has surfaced with regard to nessee has about 114,000 people classified as nursing homes. The state has conceded in June of uninsurable, while all other 27 states combined this year that it has been underfunding nursing have slightly more than 100,000 people. homes by at least $4 per patient per day. The TennCare costs the state $4.3 billion annually, Legislature has designated an additional $100 about a quarter of the state s budget. Indeed, million, for an increase of $17 more per patient per budget problems have gotten so bad that day or $84 per day, just under the national averTennessee s governor called a special legislative age.39 But the Legislature did not take this action session for November 1999 to consider adopting for until the nursing home industry had been rocked by the first time an income tax to supplement the scandal. state s sales tax. LegislaNotice that these tors rejected the income It would appear that Oklahomans changes do not only tax proposal and created are getting more administration for affect Medicaid particia commission to study the their money every year, and less pants. Fully insured problem. But the inability patient care. patients must utilize the to resolve funding shortsame health care falls drove Blue Cross system. Thus cutbacks in the Medicaid program Blue Shield of Tennessee, which covers about half can affect the care of others who may be insured of TennCare recipients, to announce it would be and expecting higher levels of care. dropping out of the program in 2000. Quality of Care in Oklahoma. Reducing reimHas SoonerCare Increased Patient Choice? bursement rates doesn t affect the level of quality The Oklahoma Health Care Authority was very immediately. Doctors, hospitals and other providclear about wanting to provide Medicaid recipients ers attempt to maintain the same level of care, even with a wider choice of physicians. However, low when faced with cutbacks. However, if reimbursereimbursement rates will have just the opposite ment rates drop below a certain level which will effect. vary from state to state quality of care will begin Again, take Tennessee s TennCare program as to decline. Has Oklahoma hit that level? an example. A recent survey of doctors by the Many Oklahoma doctors have already dropped Tennessee Medical Association found that a third out of the system. The effect of this trend in Oklaof TennCare participating physicians say they homa has meant that many rural participants now intend to see fewer TennCare patients next year have to drive 30 to 40 miles in order to see a doc36 And there are anecdotal stories of patients (i.e., 2001).40 As a result, thousands of TennCare s tor. having to drive much further, impeding patients 1.3 million participants would be unable to receive 37 ability to get regular care. care. Even if the state succeeds in signing on more Eventually health care providers who don t leave MCOs to participate in the program, that will not look for ways to cut costs. That may mean switchsolve the doctor problem. Moreover, 42 percent of ing to physicians assistants or aides who are not Tennessee s doctors would refuse to sign with any

new MCO, according to the survey.41 stricted, as much money as possible is going to More than half the physicians cited bureaucratic those who need it rather than to administration. hassles and inadequate reimbursement as reasons How is SoonerCare doing on efficiency? Poorly, not to sign new contracts or to curb their participaaccording to the Southern Legislative Conference. tion in the program, according to a news article.42 Medicaid payments grew by 33.4 percent between It should be noted here that in the Medicaid Growth 1992 and 2000, although growth in the amount of Index discussed above, Oklahoma s score was 6.5 money spent per Medicaid recipient over the same times larger than Tennessee s. time period was only 1.58 percent.44 Yet administrative costs grew by 53.5 percent.45 So, it would The result will be a slow but inevitable decline in appear that Oklahomans are getting more adminchoice. Medicaid patients who have been going to istration for their money every year, and less paone physician for years may find the doctor will no tient care. longer take them. So the family has to start over and find a new physician, who may also be out What Needs To Be Done? within a few months. SoonerCare was conceived as just one part of a Why aren t low-income families expressing their much more sweeping and comprehensive health discontent over this decline? The answer may be care reform proposal. Fortunately, the bigger vision the result of the way low-income people respond to for Oklahoma health care reform was never implesuch problems. mented fortunately Are Medicaid Particibecause it would have pants Demanding With regard to health care, the never worked. Both federal Choice? Though people poor are often a silent minority law and state fiscal rewith private health and legislators know it. straints limit what states insurance frequently can do with regard to express a desire to have expanding health insura wide choice of physiance coverage. cians, it isn t clear that patient choice has been an For example, most large employers who offer issue among low-income Oklahomans. As was health insurance self-insure under the Employee noted in a 1997 analysis of Oklahoma s rural Retirement Income Security Act (ERISA), which is managed care, currently, 85 percent of Medicaid federal law and thus puts those health plans recipients fail to choose a primary care provider 43 which in some states can include 50 percent of the and are assigned by SoonerCare. However, this lack of response may be a result of not understandworkforce outside of state control. No comprehening the system or the instructions. It may also be a sive plan will work when up to 50 percent of the failure to educate participants about what they are workforce is excluded. Indeed, no reform plan that supposed to do. misses 50 percent of the working population and Whatever the reason, it appears that choosing a their dependents can even be called comprehenprimary care doctor, which was so important to sive. those who created the system, has failed to make However, though limited in their ability to reform significant progress. the health insurance system, states are not powerless. If Oklahoma legislators want to promote a Are Oklahomans Getting Their Money s Worth? vision for an efficient and effective health care It seems that SoonerCare has achieved none of system, they should integrate positive state-level its objectives other than holding down costs. And reforms along with calls on Congress and the while holding down costs is important, it can also White House to pass reforms that will expand undermine access to and the quality of care. Thus, insurance coverage and consumer choice. What it is imperative that when spending is being reare some of the things that can be done?

State Reform: Maintain Strong Economic Oklahomans. Such attempts should be abanGrowth. One of the best antidotes for being unindoned. There is very little reason to tax middlesured is strong economic growth. Under Gov. Frank income Oklahomans in order to provide them with Keating, Oklahoma has pursued some pro-growth health insurance. It would be better not to tax them reforms, such as passing the first cut in the perand let them buy their own policies if they need sonal income tax in 50 years. In addition, the state them. has been working to keep the regulatory burden on Another place where Oklahoma had some con46 Gov. business low and addressed tort reform. trol over benefits was its S-CHIP program. Had the Keating should continue pushing for further tax state chosen to turn to the private sector, as it was relief, right-to-work legislation and workers compermitted to do under the legislation, it could have 47 pensation reform. provided low-income children not qualified for Although Oklahoma ranks 18th among the 50 Medicaid with good coverage, just not as rich as states on the Economic Freedom Index, there Medicaid. Had the state made that choice, budget remains much to be done.48 It is the eighth poorest shortfalls in recent years might never have ocstate in the nation in terms of per capita personal curred. 49 income. Only a strong economy will ensure that The lure of matching federal dollars and the workers have highpolitical benefits that paying jobs and come with creating or One of the great benefits of managed care employers provide expanding programs from state legislators viewpoint is that they health insurance, has led many states to can pass the responsibility for ensuring the reducing the need to over-promise what quality of health care for the poor to the provide Medicaid. they can afford, managed care organizations that contract State Reform: Keep forcing them to look with the state, which then pass the Benefits Low and for places to cut back. responsibility and risk on to the providers. Affordable. One of Rather than begin to the primary problems chop programs or with Medicaid is that it provides a very rich healthproviders fees, policymakers should take the time benefits package much richer than many workers to examine the program and see if structural who are covered by employer-provided health changes are needed. They should ask what the insurance have. Indeed, a state-funded analysis of state can truly afford and work with providers and Tennessee s TennCare program found that it inMCOs to create a program that works for patients, cluded 450 state employees who were eligible for providers and taxpayers. 50 coverage under the state s health insurance plan. State Reform: Continue Welfare Reform. Across They simply wanted the more comprehensive the country most states, including Oklahoma, have package provided by TennCare. seen significant declines in their welfare caseloads. Unfortunately, states are limited by federal law in Oklahoma reached its caseload peak of 51,301 in their ability to reduce Medicaid benefits. In addiMarch 1993. By the end of 1998, the caseload had tion, matching federal funds make it appealing to dropped more than half, to 20,895.51 For many states, the drastic decline in welfare include more benefits because it draws more caseloads also reduced the number of people on federal dollars. Medicaid, since the two welfare programs have However, states do have some control over who is often gone hand-in-hand.52 According to a Sepeligible for benefits. Some in the Oklahoma Legistember 10, 1999, analysis by the U.S. General lature want to push SoonerCare eligibility limits up Accounting Office (GAO), between 1995 and 1997, to 250 percent of the federal poverty level more welfare caseloads declined nationwide by 23 than $40,000 a year for a family of four, and about percent, while Medicaid declined by 7 percent. Of twice the average per capita personal income of

the 21 states sampled, Wisconsin recorded the about 95 to 98 percent of the population and a largest Medicaid caseload decline, 19 percent, place to go for those who have a pre-existing while Delaware experienced a 26 percent incondition.56 53 While Oklahoma experienced an increase. State Reform: Review the Oklahoma Health crease in Medicaid participants in 1998 after two Care Authority. The Oklahoma Health Care Authoryears of declines, children under the age of 20 are ity was created for the purpose of implementing a responsible for most of that growth, largely a result sweeping health care reform program. That misof the S-CHIP program.54 sion has faded, and OHCA s job now is overseeing Maintaining a strong economic climate will mean the transition of Oklahoma s Medicaid program more low-income Oklahomans will have the opporinto managed care. However, a program created tunity to find jobs that provide health insurance. with one goal in mind is not always adequate for Shrinking the rolls through economic growth and the job when another goal has been put in place. opportunity, not budget crunches, is the best way to In other words, it is fair to ask whether the OHCA as get Oklahomans off the Medicaid rolls. it is currently organized and funded is the best State Reform: Maintain the Safety Net. One of organization to meet the new mission. the goals of the Clinton health plan and of the SoonerCare has experienced some difficulties Oklahoma Family lately. There is reason to Choice Health Plan was believe that Oklahoma There is very little reason to tax to allow people to was addressing probmiddle-income Oklahomans in order obtain health insurance lems and creating a to provide them with health insurance. regardless of their more effective and It would be better not to tax them and health status. Thus, a efficient Medicaid prolet them buy their own policies if they person with a medical gram up to the midneed them. condition would be able 1990s. That trend may to buy health insurance have reversed itself with for a reasonable price with no restrictions. the coming of SoonerCare, and both quality and While legislation requiring insurers to accept efficiency may be in real trouble. For example, the such people sounds good, it always destroys the Southern Legislative Conference reports significant market for insurance, because people will simply growth in Oklahoma s Medicaid administrative wait until they have a medical condition before they costs. More money spent on administration means buy insurance. less money available for providing health care. The better solution for the uninsurables is to Could the OHCA be more efficient? Is it undermincreate a safety net so that those who have been ing the quality of care for low-income Oklahodenied health insurance can get coverage. Curmans? It is probably time for the state Legislature rently, 28 states, including Oklahoma, have such to create a review panel made up of stakeholders programs. to examine the agency and make recommendaOklahoma s plan went into effect in July of 1996, tions for any needed improvements. and covered about 2,000 Oklahomans by the Federal and State Reform: Don t Impose Manmiddle of last year.55 Premiums are reasonable, dates on Health Insurance. With regard to health with participants paying about 25 percent more insurance, a mandate is any law a state or Conthan they would under a standard premium, and gress imposes on insurance coverage. Such laws administrative costs have been declining as a require insurers to cover specific medical providers percent of money paid out. By creating and mainsuch as chiropractors and podiatrists, specific taining the high risk pool, Oklahoma helps to medical services such as drug and alcohol abuse ensure that there will be a thriving market for counseling or in-vitro fertilization, or specific popuhealth insurance for those healthy enough to buy it lations such as people with the HIV virus.

Mandates make health insurance more comprehensive, but they also make it more expensive. The primary reason is increased utilization. Although a chiropractor may charge less than a medical doctor to cure a medical condition both are qualified to treat, mandating that insurance cover chiropractors means people who had been paying out of pocket to see one can have part or all of the cost covered by insurance, which will increase utilization and ultimately increase the cost of health insurance. Most mandates have been imposed by the states. Although there were only seven such mandates nationwide in 1965, by the end of 1999 there were more than 1,350 26 of which were Oklahoma s according to Blue Cross Blue Shield America.57 In addition to these states actions, Congress has started passing mandates and restrictions on the health insurance market and seems amenable to doing so again in the future. While there are proposals before Congress that would allow small groups to buy mandate-free health insurance (in essence, allowing small employers to self-insure under ERISA), those proposals seem stalled and unable to gather enough support to pass both the House and the Senate. Some states have made provisions for mandatefree policies. And when the legislation is written correctly and the public is made aware of such policies, they can be very attractive. But the key ingredient for affordable health insurance is avoiding guaranteed issue and community rating, whether imposed by states or Congress.58 When those restrictions are imposed, the market for health insurance quickly becomes very expensive if policies are available at all. Federal Reform: Tax Fairness. When employees get their health insurance from an employer, they get a tax exclusion. None of the money the employer spends on health insurance for employees is considered income for tax purposes. The selfemployed get only a partial tax break rising to 100 percent by 2003 and employees who do not get employer-provided health insurance get no break at all. As long as federal tax law encourages people to obtain their health insurance through their em-

ployer, the market for health insurance will not work as well as it should and millions of people will remain uninsured. Tax fairness is needed so that insured people get the same tax break whether they get their health insurance through their employer or they purchase it themselves.59 Although expanding the tax deduction for health insurance would help, there is a growing bipartisan consensus that providing a tax credit which is deducted directly from the amount of taxes owed for health insurance is a fairer and more efficient way to provide a tax break to those who purchase their own policies. For example, House Majority Leader Dick Armey (R-Texas) and Rep. Pete Stark (D-Calif.) have introduced legislation that would provide a refundable tax credit of up to $3,000 for a family for the purchase of health insurance. Rep. Jim McDermott (D-Wash.) has proposed legislation that would provide a tax credit for 30 percent of the cost of a health insurance policy, and Democratic presidential candidate Al Gore has proposed a tax credit of up to 25 percent. The tax credit proposal would provide a tax break to anyone who didn t get health insurance through an employer that is, the 15 million who now purchase their own policies, plus the 44 million who are uninsured.60 Since a $3,000 refundable tax credit (under the Armey-Stark plan) is enough to buy a basic family policy in many states, most people could purchase health insurance coverage with little or no additional money out of pocket. As a result, millions of uninsured Americans would take advantage of the program, making state-based proposals for universal health insurance coverage, like Oklahoma s Family Choice Health Plan, unnecessary.61 Then states could focus on creating a real safety net for low-income families and those who, because of a medical condition, can t get health insurance. Federal Reform: Reform Medical Savings Accounts. Medical Savings Accounts (MSAs) give people the opportunity to move from a conventional, low-deductible health insurance plan or an HMO to one with a high deductible and to put the premium savings in a personal savings account. These accounts are used to pay for routine and

preventive medical care, and are combined with a high-deductible health insurance policy that pays for major expenses. Money left over in the MSA at the end of the year can be withdrawn or rolled over to grow with interest. Several states passed Medical Savings Account legislation before Congress passed a federal MSA demonstration project as part of the Health Insurance Portability and Accountability Act (HIPAA) in 1996. But state-based MSAs could not provide much of a tax break and so have had a small impact. Currently, more than 50,000 HIPAA-qualified MSA plans are in force nationwide. An early survey by the federal government found that more than a third of the people moving into MSA plans were uninsured.62 One reason that more MSAs have not been sold is the burdensome restrictions and regulations Congress imposed on them. Several members of Congress have introduced legislation that would reduce or eliminate many of the restrictions, making MSAs more attractive and more affordable and attracting more of the uninsured to leave those ranks.63

Conclusion SoonerCare was conceived as part of a broader vision to reform Oklahoma s entire health care system. That broader vision has been abandoned, at least for now, and the SoonerCare program that was implemented has failed to live up to its promises. Though the program has contained costs, patient choice and quality of care appear to be declining. Despite the program s manifest problems, proponents often act as if there are none. For example, there is a movement to expand SoonerCare to cover Oklahomans who make up to 250 percent of the federal poverty level, even though the state is having difficulty meeting the program s current obligations. Managed competition has had its chance and failed. It is time to rethink SoonerCare its mission, obligations and goals. Oklahoma needs a Medicaid program that provides quality care for lowincome families that is accessible for those who need it and affordable for those who pay the bills Oklahoma taxpayers.

Endnotes

Quoted from Application to the Department of Health and Human Services for the Development of SoonerCare, Oklahoma Health Care Authority, December 1, 1994.

As Melinda Schriver and Grace-Marie Arnett have shown, there were 16 states that enacted aggressive, Clinton-type health insurance reforms between 1990 and 1994. According to their study: In 1996, all 16 states experienced an average annual growth in their uninsured populations eight times that of the other 34. In 1990, before the blizzard of reforms was enacted, the one-year average growth rate in the uninsured population in these 16 states was roughly equivalent to that of the other 34 states. By 1996, the oneyear average growth rate in the uninsured population is these 16 states was 8.1 percent; in the other 34, it was only 1 percent. Melinda L. Schriver and Grace-Marie Arnett, Uninsured Rates Rise Dramatically in States with Strictest Health Insurance Regulations, Galen Institute, August 14, 1998. 1

Ibid.

Federal welfare reform legislation that passed in 1996 ended the 60-year-old AFDC program and replaced it with Temporary Assistance for Needy Families (TANF). 7

8 Karen Klinka, 5 HMOs Win Bids for Medicaid Plan, The Daily Oklahoman, April 14, 1995.

Historically, Medicaid has been a fee-for-service program, in which health care providers would be reimbursed for each procedure performed. Under capitation, the state pays the HMO a fixed amount of money per month for each enrollee. Health care providers, in turn, agree to provide all care needed by the enrollees. 9

2 Quoted in Report of the Ad Hoc Committee on the Oklahoma Health Care Authority and SoonerCare, Journal of the Oklahoma State Medical Association, Vol. 90, No. 5, May-June 1997, p. 195.

For a discussion of the perverse economic incentives inherent to managed competition see John C. Goodman and Gerald L. Musgrave, A Primer on Managed Competition, National Center for Policy Analysis, NCPA Policy Report No. 183, April 19, 1994. 10

See Alain C. Enthoven, The History and Principles of Managed Competition, Health Affairs (Supplement 1993), pp. 24-48. 3

Application to the Department of Health and Human Services for the Development of SoonerCare, Oklahoma Health Care Authority. 11

Karen Klinka, Managed Care Proposed: Plan to Streamline Medicaid Services, The Saturday Oklahoman & Times, January 7, 1995. 4

For a discussion see Glenn P. Dewberry, Jr., ClintonCare

Becoming Reality in Oklahoma, OCPA Perspective, July 1998, p. 3.

For example, Lee Newcomer, chief medical director for United HealthCare, which has had to leave some managed Medicaid contracts, has been quoted as saying, We feel we have a social obligation to Medicaid. But losing money on Medicaid would be unfair to other clients. Leigh Page, Moving Away from Managed Medicaid. 31

13 Application to the Department of Health and Human Services for the Development of SoonerCare, Oklahoma Health Care Authority, p. 4.

Medicaid Enrollment and Spending Trends, The Henry J. Kaiser Family Foundation, September 1999. 14

Stephen Norton, Recent Trends in Medicaid Physicians Fees, Urban Institute, September 1999, Table 3. 32

Ibid.

33 Crow and Scott, Comparative Data Report on Medicaid, p. 100.

For a full discussion of the TennCare program see Merrill Matthews Jr., TennCare Reform: Restoring Tennessee s Health Care Safety Net, Tennessee Family Institute (now the Tennessee Institute for Public Policy), Policy Study 113, January 2000; Merrill Matthews Jr., Lessons from Tennessee s Failed Health Care Reform, Heritage Foundation Backgrounder No. 1357, April 7, 2000; and Patrick S. Poole, A Proposal for Comprehensive TennCare Reform, Tennessee Institute for Public Policy, Policy Study 115, May 2000. 16

See Gypsy Hogan, Legislator Says Funds Not Going to Dentists, The Daily Oklahoman, February 5, 1999; and Glenn P. Dewberry, Jr., Medicaid Managed Care Unworkable, OCPA Perspective, Oklahoma Council of Public Affairs, March 1999. Evaluation of AHCPR Rural Managed Care Projects, Rural Health Research and Policy Analysis Center, Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill, site visitors Nancy Fasciano and Jeanette Bergeron, No. 5, Contract No. 290-93-0038, September 2, 1997, p. 9. 36

1993 Legislative Health Proposals and Potential Health Care Reform for the Future, February 1993, p. 2. 17

18 Richard Vedder, Lowell Gallaway and Robert Lawson, 50-State Medicaid Report Card, Citizens for a Sound Economy Foundation, 1996.

See Report of the Ad Hoc Committee on the Oklahoma Health Care Authority and SoonerCare, p. 195. 37

Michael Lapolla, 1997 Sources of Health Insurance, Center for Health Policy Research, Oklahoma State University College of Osteopathic Medicine, September 1999. 19

38 Senate OKs Hospital Staff Bill, The Daily Oklahoman, April 23, 1996.

20 See SoonerCare Where Are We Headed? Oklahoma Health Care Authority, 1997, p.6. While expanding access to coverage is not mentioned in this list, that, along with containing costs, were the central goals of the state s reform movement.

Mick Hinton, $100 Million Designited to Help Nursing Centers, The Daily Oklahoman, June 6, 2000. The nursing home industry agreed to pay a $4 per bed per day fee, which the state Medicaid agencies use as an additional source of funds to match Medicaid dollars. 39

21 With a matching federal rate of 70 percent, expanding Medicaid is even more attractive for Oklahoma than for many other states, since the average match rate is only 57 percent.

Lawmakers Must Face TennCare Crisis, Kingsport Times News, September 24, 2000.

Brian Crow and Willie Marie Scott, Comparative Data Report on Medicaid, A Report Submitted to the Fiscal Affairs and Governmental Operations Committee, Southern Legislative Conference, Council of State Governments, October 23-27, 1999, p. 101. 22

Ibid.

Evaluation of AHCPR Rural Managed Care Projects, Rural Health Research and Policy Analysis Center, p. 9. 43

Crow and Scott, Comparative Data Report on Medicaid, p. xxvii. 44

Vedder, Gallaway and Lawson, 50-State Medicaid Report Card. 23

45 Ibid., p. 97. While this figure is high, it is far from the highest in the SLC. Although some states had lower administrative growth than for patient services, several states exceeded 100 percent growth in administrative costs.

Oklahoma chose to fulfill its federal obligation to expand coverage to low-income children who do not qualify for Medicaid by expanding the state s Medicaid program, rather than turning to private-sector alternatives. 24

See Grant Gulibon, Growing Oklahoma s Economy: Tax Cuts vs. Economic Development Programs, Oklahoma Council of Public Affairs, September 1999. 46

Mick Hinton, Medicaid Cuts Await Action from Keating, The Daily Oklahoman, May 25, 1999. 25

26 Lisa Tatum, Two Medical Programs Face Ax, The Daily Oklahoman, November 19, 1999.

47 Gov. Frank Keating, State of the State Address, February 7, 2000.

Karen Klinka, Officials Praise State s Medicaid Managed Care Savings, The Daily Oklahoman, April 12, 1996. 27

John Byars, Robert McCormick and Bruce Yandle, Economic Freedom in America s 50 States: A 1999 Analysis, Center for Policy and Legal Studies, Clemson University, March 1999. 48

Leigh Page, Moving Away from Managed Medicaid, AMNews, June 1, 1998. 28

Page, p. xxx.

Ibid.

49 1999 State Per Capita Personal Income (Revised), Bureau of Economic Analysis news release, September 12, 2000.

John Perry, HMOs Hit by Falling Earnings, The Sunday Oklahoman, November 30, 1997. 30

Blue Cross Blue Shield Association, December 1999.

Paula Wade, TennCare Finds 16,500 Ineligible, The Commercial Appeal, August 11, 1999. 50

58 Guaranteed issue requires insurers to sell a policy to all comers regardless of health status, community-rating requires insurers to charge their clients the same price regardless of their health status, and a prohibition on preexisting condition exclusions means that insurers cannot impose a waiting time before a policy will begin covering a specific medical condition, even if the applicant had the condition when applying.

Robert E. Rector and Sarah E. Youssef, The Impact of Welfare Reform: The Trend in State Caseloads, 1985-1999, The Heritage Foundation, 1999, p. 74. 51

See, for example, Losing Health Insurance: The Unintended Consequences of Welfare Reform, Families USA, May 1999. 52

53 General Accounting Office, Medicaid After Welfare Reform, Washington, D.C., September 10, 1999, p. 2.

59 In contrast, economist Milton Friedman has suggested that no one get a tax break for health insurance, just as no one gets a tax break for other types of insurance. But the goal of both approaches is the same: a level tax playing field that does not subsidize one method of buying a health insurance policy over another.

Crow and Scott, Comparative Data Report on Medicaid, p. 103. 54

55 Comprehensive Health Insurance for High-Risk Individuals, Communicating for Agriculture, p. 150, 2000.

The people in high risk pools do not represent all of the uninsurables in a given state. Many people who might be deemed uninsurable if looking to purchase individual coverage may have coverage through an employer or through a spouse. Indeed, high-risk pools are very fluid, as people move in and out because of finding insurance through an employer or spouse, or their medical condition improves, or they turn 65 and are eligible or Medicare. And, of course, some die. Milliman & Robertson estimates that one can expect about 2 percent of the under-65 population for middle- and upper-income workers to fall in the uninsurable category. Mark Litow and Peter Hendee, Tax Credit Estimates for Under Age 65 Population (Revised), prepared for the Council for Affordable Health Insurance, March 22, 1999.

60 Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 1999 Current Population Survey, Employee Benefit Research Institute Issue Brief, January 2000.

61 A recent Zogby poll found that 54.7 percent of those surveyed believed the federal government should provide a tax credit of up to $3,000 to help people purchase health insurance. See Many Favor Tax Credits to Help Uninsured, Reuters News Service, September 20, 2000.

Merrill Matthews Jr. and Jack Strayer, Making Medical Savings Accounts Better, National Center for Policy Analysis, Brief Analysis No. 295, June 11, 1999. 62

For a discussion of what reforms are needed, see Greg Scandlen, Medical Savings Accounts: Obstacles to Their Growth and Ways to Improve Them, National Center for Policy Analysis, Policy Study No. 216, July 1998. 63

Susan S. Laudicina and Katherine Pardo, State Legislative Health Care and Insurance Issues: 1999 Survey of Plans, 57

About the Authors Merrill Matthews, Jr., Ph.D. is a visiting scholar with the Institute for Policy Innovation. He is a public policy analyst specializing in health care, Social Security, welfare and Internet issues, and is the author of numerous studies in health policy and other public policy issues. He is past president of the Health Economics Roundtable for the National Association for Business Economics, the largest trade association of business economists, and health policy advisor for the American Legislative Exchange Council, a bipartisan association of state legislators. Dr. Matthews is a Brain Trust columnist for Investor s Business Daily, and has been published in numerous journals and newspapers, including The Wall Street Journal, Barron s, USA Today and The Washington Times. He is the political analyst for USA Radio Network and has been a commentator for National Public Radio. Dr. Matthews received his Ph.D. in Philosophy and Humanities from the University of Texas at Dallas.

Glenn P. Dewberry, Jr., M.D. is a family practice physician in Oklahoma City. He received his M.D. from the University of Oklahoma School of Medicine in 1976. After completing his internship at the Affiliated Hospitals of the University of Oklahoma Health Sciences Center, he served three years in the U.S. Army Medical Corps. He then completed his residency in family practice in the Department of Family Practice at the University of Kansas School of Medicine, where he later served as Assistant Professor. He returned to Oklahoma to enter private practice in 1986. Dr. Dewberry served on the Oklahoma State Medical Association s Ad Hoc Committee on the Oklahoma Health Care Authority and SoonerCare, and helped write the committee s report in 1997.

Board of Trustees

Greg S. Allen H Enid Blake Arnold H Oklahoma City William M. Avery H Oklahoma City Steve W. Beebe H Duncan G.T. Blankenship H Oklahoma City John A. Brock H Tulsa David R. Brown, M.D. H Oklahoma City Aaron Burleson H Altus Ed L. Calhoon, M.D. H Beaver Jim Cantrell H Lawton Robert H. Chitwood H Tulsa Paul A. Cox H Oklahoma City Josephine Freede H Oklahoma City Kent Frizzell H Claremore John T. Hanes H Oklahoma City Ralph Harvey H Oklahoma City Paul H. Hitch H Guymon Henry F. Kane H Bartlesville Thurman Magbee H Oklahoma City Tom H. McCasland, III H Duncan Lew Meibergen H Enid Ronald L. Mercer H Bethany Lloyd Noble, II H Tulsa Robert Reece H Oklahoma City Patrick Rooney H Oklahoma City Joseph F. Rumsey, Jr. H Oklahoma City Richard Sias H Oklahoma City John Snodgrass H Ardmore William Thurman, M.D. H Oklahoma City Betty Lou Lee Upsher H Oklahoma City Lew Ward H Enid Gary W. Wilson, M.D. H Lawton Harold Wilson H Lawton Daniel J. Zaloudek H Tulsa

Adjunct Scholars Will Clark, Ph.D.

University of Oklahoma

David Deming, Ph.D. University of Oklahoma

J. Rufus Fears, Ph.D. University of Oklahoma

Bobbie L. Foote, Ph.D. University of Oklahoma (Ret.)

E. Scott Henley, Ph.D., J.D. Oklahoma City University

James E. Hibdon, Ph.D. University of Oklahoma (Ret.)

Russell W. Jones, Ph.D. University of Central Oklahoma

Andrew W. Lester, J.D.

Oklahoma City University (Adjunct)

David L. May, Ph.D. Oklahoma City University

Ann Nalley, Ph.D. Cameron University

Bruce Newman, Ph.D.

Western Oklahoma State College

Stafford North, Ph.D.

Oklahoma Christian University

Paul A. Rahe, Ph.D. University of Tulsa

W. Robert Reed, Ph.D. University of Oklahoma

Michael Scaperlanda, J.D. University of Oklahoma

Legal Counsel

DeBee Gilchrist & Lidia H Oklahoma City

Staff

Brett A. Magbee H Executive Director Brandon Dutcher H Research Director Chip Carter H Development Director Marilyn Tardibono H Admin. Assistant

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Andrew C. Spiropoulos, J.D. Oklahoma City University

Daniel Sutter, Ph.D. University of Oklahoma

Oklahoma Council of Public Affairs

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