History says earth is round, medical costs will rise under Affordable Care Act
Published: August 17th, 2012
Expansion of Medicaid coverage under the Affordable Care Act (ACA) will either result in long-term savings worth millions to Oklahoma taxpayers, or will cost state taxpayers an additional $11.4 billion.
While the experts disagree, history says you can bet President Barack Obama’s Affordable Care Act will become more expensive than anyone predicts.
Oklahoma “can’t afford the Medicaid expansion. Health and Human Service spending by the state, which includes Medicaid spending, is already the largest portion of the total state budget and continues to grow,” said Jonathan Small of the Oklahoma Council of Public Affairs, a free market think tank.
Not so fast, said David Blatt of the progressive Oklahoma Policy Institute in Tulsa. He argued revenue hikes and cost savings will offset increased government expenditures on health.
“Focusing only on new outlays while ignoring new revenues and cost savings is like saying that making the playoffs cost the Oklahoma City Thunder an additional $5 million for staff and building expenses, while ignoring the additional revenue brought in by ticket sales and concessions for playoff games,” Blatt said.
Confused? Even experts aren’t sure who’s right.
“It’s a very difficult task to estimate revenues for the next year, much less several years down the road,” state finance director Preston Doerflinger told CapitolBeatOK.
Recent state history suggests that government health programs tend to become more expensive.
Oklahoma’s 2001 Medicaid spending totaled $2 billion, of which the state contributed about $495.5 million. Last year, that program ran $4.4 billion, of which the state contributed nearly $1.3 billion.
Health care is now the state’s top budget expense, ahead of No. 2 education. Even in the pre-Obamacare era, Oklahoma relied on federal stimulus dollars to cover some Medicaid costs.
Mike Fogarty, CEO of the Oklahoma Health Care Authority (OHCA), said increased costs for taxpayers will be offset through better personal health for newly insured individuals, reductions in the number of uninsured hospital payments, and state government savings through Medicaid expansion that “could be matched federally.”
OHCA rated well in a 2011 assessment of Medicaid error rates, and Fogarty contends administrative costs are low compared to other states.
“Relative to potential benefits gained,” said agency spokesman Carter Kimble, “the state’s investment is minimal.”
At the heart of Small’s Medicaid conclusions are assumptions about the ACA in its entirety — drawn from analysis of other federal programs. He views state and federal tax burdens holistically, asserting “a tax is a tax” and “a dollar spent is a dollar spent.”
OCPA focused on the first full decade of ACA implementation, costs Small contends could reach $11.4 billion over a decade. He points out, “On a per year basis, that’s about 20 percent of the current appropriated budget. Already, without Obamacare, the maintenance of effort provisions of Medicaid result in annual state match increases of $50-$70 million a year.”
In support of his view that federal programs nearly always cost more than anticipated, Small points to historic analyses showing that when established in 1966 Medicare’s cost was $3 billion — projected to reach $12 billion by 1990. The program’s real costs were $107 billion in 1990.
Rather than implement the new federal law, including Medicaid provisions, Small wants Oklahoma to follow the leads of Florida, Louisiana, Rhode Island and Kansas in seeking waivers from the mandates of “ObamaCare.” Small says Oklahoma needs waivers to allow the Medicaid program to charge higher co-pays for risky behaviors, and for unnecessary emergency room visits. He advocates encouraging uninsured workers to be placed on employers’ private plans.
Small criticized past Legislatures for diversion of at least $161 million from the Insure Oklahoma fund, the program administered by Fogarty’s agency which subsidizes private insurance for the working poor. The structure of the U.S. Supreme Court decision, he says, allows Insure Oklahoma’s individual participants to remain in the program, and not be forced into Medicaid.
In 2011, after working on a health exchange required under the ACA, Gov. Mary Fallin reversed field and was among the first governors to defy the mandate. After the Supreme Court upheld law, Fallin saw no hurry to address the issue.
Doerflinger said she’ll decide on Medicaid policy after November’s election, and will listen to “all the stakeholders.”
He told CapitolBeatOK, “The problem is that the state would have to begin picking up part of the tab three years after implementation.” On Medicaid, budget concerns might force Fallin to participate in the other “exchange” – the one already underway among Small, Blatt and Fogarty.
Fallin was an ally of U.S. Rep. Paul Ryan of Wisconsin during her two terms in Congress, and has explicitly endorsed a Ryan-style block grant approach to state Medicaid funding. Ryan has brought his budget-cutting agenda to the Republican party’s national ticket as presumptive presidential nominee Mitt Romney’s running-mate.
The state Legislature has its own wait-and-see approach. The House-Senate Joint Committee on Federal Health Care Law studied the issue, but took no action. Neither the House nor the Senate has Interim Studies focused on Medicaid policy and spending.
You may contact Patrick B. McGuigan at Patrick@capitolbeatok.com and follow us on Twitter: @capitolbeatok.