Ok­la­homa looks for a way to shore up Med­i­caid—with­out us­ing the “O” word

Crash­ing oil rev­enue has the state re­think­ing federal health-care aid “You men­tion ‘Med­i­caid ex­pan­sion,’ that’s dirty words”

Bloomberg Businessweek (Europe) - - CONTENTS - −John Tozzi

Dwight Sublett has seen a lot of busts in his 33 years as a pe­di­a­tri­cian in Still­wa­ter, Okla., but this year ranks among the worst. With oil hov­er­ing at $35 a bar­rel, the state is fac­ing a $1.3 bil­lion bud­get short­fall for the fis­cal year start­ing on July 1. On March 29 the Ok­la­homa Health Care Au­thor­ity warned it would have to cut 25 per­cent from re­im­burse­ments to physi­cians, hos­pi­tals, and other med­i­cal providers un­der the state’s Med­i­caid pro­gram, Soon­erCare. The pro­gram cov­ers a mil­lion poor Ok­la­homans each year, more than a quar­ter of the state’s pop­u­la­tion. “For the ru­ral physi­cians, this is go­ing to be a dev­as­tat­ing blow,” Sublett says.

Across the coun­try, Med­i­caid cov­ers 71 mil­lion low-in­come Amer­i­cans. Med­i­caid is jointly funded by the federal gov­ern­ment and states, and it typ­i­cally ac­counts for 20 per­cent to 35 per­cent of a state’s an­nual bud­get. The crash in oil prices has made it harder for energy-de­pen­dent states to come up with their share. “These states that have had fairly sta­ble bud­gets—Ok­la­homa would be the clas­sic ex­am­ple—sud­denly they’re run­ning re­ally big deficits,” says Gre­gory Ha­good, se­nior man­ag­ing di­rec­tor of Solic Cap­i­tal, an in­vest­ment and ad­vi­sory firm that works with hos­pi­tals in fi­nan­cial dis­tress.

Ok­la­homa has de­clined to ex­pand Med­i­caid, leav­ing unin­sured an

es­ti­mated 91,000 peo­ple who might have qual­i­fied for fed­er­ally sub­si­dized cov­er­age un­der the 2010 Af­ford­able Care Act. “You men­tion ‘Med­i­caid ex­pan­sion,’ that’s dirty words in this state” be­cause of the link to Oba­macare, Sublett says. About 16 per­cent of Ok­la­homans had no health in­sur­ance in 2014, com­pared with 10 per­cent of the na­tional pop­u­la­tion, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion.

Years of tax cuts in Ok­la­homa have con­trib­uted to the bud­get hole. The top state in­come tax rate de­clined from 6.65 per­cent in 2004 to 5 per­cent this year, elim­i­nat­ing $1 bil­lion in an­nual rev­enue, ac­cord­ing to the non­profit Ok­la­homa Pol­icy In­sti­tute. Tax rev­enue will come in about 7 per­cent be­low the level ex­pected for the bud­get year end­ing on June 30, says Nico Gomez, chief ex­ec­u­tive of­fi­cer of the Ok­la­homa Health Care Au­thor­ity, which over­sees Med­i­caid. He’s pre­par­ing for a 15 per­cent cut in state fund­ing next year, though the pre­cise amount is un­cer­tain. For ev­ery 40¢ the state cuts from Med­i­caid, Ok­la­homa loses 60¢ in federal match­ing funds.

Gomez says the pro­gram has al­ready re­duced ben­e­fits to stay ahead of bud­get cuts, in­clud­ing den­tal care for preg­nant women. Last year he agreed to take a pay cut, but he ac­knowl­edges that has mostly sym­bolic value, say­ing, “12 per­cent of my salary is not go­ing to save the bud­get.” The state has also low­ered re­im­burse­ment rates for doc­tors and other treat­ment providers sev­eral times. “We’ve been through this be­fore, boom and bust. It feels dif­fer­ent this time,” Gomez says. “Right now it’s dif­fi­cult to see when we’re com­ing out.”

Gomez has pro­posed what he calls a long-term so­lu­tion. Un­der his plan, about 350,000 Ok­la­homans who are on Med­i­caid or unin­sured would get sub­si­dized in­sur­ance through a state pro­gram, In­sure Ok­la­homa, that pre­dates the Af­ford­able Care Act and is mostly funded by to­bacco taxes. The change would re­quire ap­proval from ad­min­is­tra­tors in Wash­ing­ton to free up an in­fu­sion of federal Med­i­caid funds.

The pro­posal is broadly sim­i­lar to back­door ar­range­ments sev­eral Repub­li­can-led states, in­clud­ing Arkansas and In­di­ana, have used to get federal funds for ex­pand­ing health cov­er­age with pri­vate in­sur­ance rather than Med­i­caid. Gomez is quick to note that his pro­posal would shrink the Med­i­caid rolls in his state. “We’re not ac­tu­ally grow­ing the en­ti­tle­ment,” he says.

Health-care providers in Ok­la­homa would wel­come the move, what­ever it’s called. “We don’t seem to have a prob­lem in this state in ac­cept­ing federal dol­lars for roads or other pur­poses,” says Craig Jones, pres­i­dent of the Ok­la­homa Hos­pi­tal As­so­ci­a­tion, which has pushed the state to take ad­van­tage of federal money avail­able un­der the Af­ford­able Care Act. “It’s only be­cause it’s tied to Oba­macare that peo­ple have had a real con­cern about it.”

The bot­tom line Fac­ing a $1.3 bil­lion bud­get gap, Ok­la­homa is weigh­ing how to get federal Oba­macare funds with­out ex­pand­ing Med­i­caid.

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