A Leavitt Partners report recommends Oklahoma accept Obamacare's federal Medicaid expansion funds and use the money to buy private health insurance policies for low-income, uninsured citizens.
There's reason to believe the proposal would be far more expensive than predicted. Buried in the report, it's noted proposed rules would mandate that Medicaid enrollees face a maximum co-payment of only $8 for nonemergency use of the emergency room. This would hardly deter using the ER for routine care, which increases taxpayer costs.
Because the Leavitt plan would use Medicaid dollars to purchase private coverage, some may think the $8 co-pay won't apply. Wrong. This spring, the federal Centers for Medicare and Medicaid Services declared that under alternative Medicaid programs “beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-sharing protections. States must have mechanisms in place to ‘wraparound' private coverage to the extent that benefits are less and cost sharing requirements are greater than those in Medicaid.”
In other words, any private insurance plan purchased with Medicaid dollars must provide benefits equal to Medicaid — including strict limits on co-payments.
And the Leavitt report notes the target population of currently uninsured citizens has higher rates of smoking, heavy drinking, obesity, serious mental illness, serious psychological distress and substance use disorders than Oklahoma's current Medicaid population.
Some of these conditions are the result of personal behaviors, not a lack of insurance. So the Leavitt report suggests providing incentives for healthier behavior, such as lower co-payments. But will cutting an $8 co-pay to $6 really cause people to quit smoking, exercise and eat healthy foods?
The Leavitt report predicts Oklahoma taxpayers will pay $850 million over 10 years for the alternative Medicaid plan, but suggests new jobs “created” by government spending and associated tax revenue, as well as alleged reductions in other state health expenditures, will offset that cost and ultimately save more than $400 million.
Yet the report's projections are based on the average costs of Insure Oklahoma enrollees. As noted, that state plan covers a much healthier population. You can't estimate the price of insuring people with serious health problems based on the medical expenses of their healthy neighbors — at least, not if you want an accurate estimate. The report also predicts 10 percent or more of those covered through the Medicaid alternative will substitute taxpayer-subsidized coverage for previous employer-provided coverage.
The experience of other states also refutes savings projections. The Florida-based Foundation for Government Accountability notes Arizona officials expected to spend $2 billion on a similar Medicaid expansion between 2002 and 2008. They spent $8.4 billion. The expansion did not reduce the rate of uninsured citizens.
In Maine, childless adults added to Medicaid cost more than four times the amount spent covering low-income parents. Hospital charity care expenses continued to surge even as Medicaid expanded. Similar patterns were seen in Delaware, Oregon, Utah, Vermont and Washington, D.C. Medicaid expansion costs outran projections. Uninsured rates remained steady.
The Leavitt report's conclusions are based, in part, on the assumption that the medical expenses of sick people are comparable to those of healthy people. In many cases, it admits the proposed plan will spend taxpayer money to provide state coverage to the already insured. And the experience of other states suggests taxpayer costs will far exceed projections but the rate of uninsured citizens will hardly budge.
Lawmakers are being told that spending $850 million will actually save $400 million. They should keep this adage in mind: When something sounds too good to be true, it usually is.