INSPIRED by an Arkansas initiative, two Republican lawmakers in Oklahoma want to use federal dollars intended for Medicaid expansion to instead buy private insurance for lower-income residents.
Private insurance is preferable to Medicaid coverage, so the proposal by Rep. Doug Cox and Sen. Brian Crain has some appeal. It could cover up to 150,000 citizens without a welfare program crowding out private insurance. Plus, the proposal calls for work incentives and co-payments, which could deter overutilization and abuse. That's another selling point.
Given that Cox, R-Grove, is an emergency room doctor, there's no doubting his concern for the uninsured or his commitment to addressing Oklahoma's health care problems. In trying to develop a compromise on Medicaid expansion, he and Crain, R-Tulsa, are tackling a major issue that may win them few friends. That's commendable.
But despite their plan's positives, several problems remain. First and foremost, the proposal still requires state dollars that could be used for other things like schools, roads and public safety. Under Obamacare, the federal government is expected to cover 100 percent of the cost of Medicaid expansion (or alternatives) for three years and 90 percent in subsequent years. But that 10 percent can be substantial.
Costs going up
Cox says the state can redirect about $50 million annually in tobacco tax money that is now going to Insure Oklahoma, which is being phased out, to cover the state's share. But the tobacco tax funds may not be enough. It's been estimated Oklahoma's state share could run as high as $1.5 billion over the first seven years under Obamacare. And even without direct expansion, existing Medicaid costs are expected to significantly increase.
From a philosophical standpoint, the plan also requires the Republican-controlled Legislature to tacitly endorse increased federal spending. The 90 percent federal match Oklahoma receives will contribute to federal deficit growth and national debt. Writing in The Wall Street Journal, Goldwater Institute policy analyst Christinia Corieri recently noted that states opting out of Medicaid expansion so far (including Oklahoma) have effectively reduced federal spending by $424 billion over the next eight years. Many Oklahoma lawmakers have railed against federal spending and Obamacare. To embrace both, even indirectly, could be politically devastating.
Then there's the problem of trusting the federal government. The Cox-Crain plan requires a federal waiver. What's to stop the federal government denying a waiver and requiring straight Medicaid expansion in future years?
There's no guarantee the federal government will actually provide the 90 percent match. Corieri points out that the Obama administration has already twice proposed cutting funding to states in its 2011 and 2012 budget proposals. U.S. Sen. Tom Coburn, R-Muskogee, recently noted that when the Individuals with Disabilities Education Act passed, the federal government promised to cover 40 percent of its cost. States never received more than 21 percent.
Who will use it?
Furthermore, federal regulations may prevent the use of co-pays or offering low-cost catastrophic insurance policies to recipients instead of high-cost coverage.
Cox argues that Oklahoma can repeal the insurance program if finances become untenable. That's debatable. When other states have tried to roll back previous Medicaid expansions, lawsuits quickly followed. Federal restrictions could also make a rollback challenging.
At the same time, there's reason to wonder if this program will draw many takers. In 2009, then-state Insurance Commissioner Kim Holland said roughly 300,000 uninsured Oklahomans were between ages 19 and 32. Through Insure Oklahoma, many of those individuals could receive guaranteed-issue coverage for less than $40 per month — yet only 6,000 people did so, and most were over age 30. At that time, a healthy 25-year-old male could purchase a comprehensive individual health insurance policy for $1,634 per year. “In Oklahoma, affordability is not the issue for this age cohort,” Holland wrote.
That remains the case today. Many people are uninsured because they choose to be uninsured. The young and healthy often prefer to spend money on other things. And they don't cost-shift medical expenses to others because they typically pay those costs out of pocket. Obamacare doesn't change that fact and may actually encourage people to remain uninsured because pre-existing conditions are no longer a barrier to obtaining coverage, and because the personal tax penalty for being uninsured is less than the cost of insurance.
Bad decision by hospitals
It's possible this proposed Medicaid-expansion alternative could become an unaffordable state burden or an administrative headache with little benefit. Neither option is appealing.
Hospitals are pushing Medicaid expansion (or alternatives like the Cox-Crain plan) because they chose to endorse Obamacare, trading cuts to Medicare and federal “disproportionate share” payments (DSH) for Medicaid expansion. Now that Medicaid expansion is optional, they're scrambling.
But few really expect the Medicare cuts to remain in place, and President Barack Obama's latest budget plan calls for increasing DSH payments by $360 million in 2014, effectively rescinding the proposed cut. In other words, even Obama is backing away from Obamacare's provisions, as are many other congressional Democrats.
Cox and Crain deserve credit for trying to impose market forces on a bad plan, but the fact remains — Obamacare is a bad plan. It's the Ford Pinto of federal laws. Oklahoma lawmakers must decide if they want to ride passenger in a political car that seems destined to explode.