Fiscal Fitness: How States Cope

OK Medicaid minimizes provider cuts, hopeful for economic recovery

While some states are expecting a high-cost expansion population with complex needs in 2014, the Oklahoma Health Care Authority (OHCA), Oklahoma's Medicaid agency, expects its new enrollees may be fairly healthy. In addition, the state is seeing an uptick in revenue, which may mean that additional cuts to provider rates can be avoided.

For the group below 133% of the Federal Poverty Level (FPL), an estimated 200,000 new eligibles are expected to enroll. "We also have an estimated 50,000 children who currently qualify for SoonerCare, but are not enrolled in the program, who may be more likely to follow their parents into coverage," says Garth L. Splinter, MD, Oklahoma's state Medicaid director. "We currently have some eligibility groups up to 185%, mostly children, so we may be losing some of these to the Health Insurance Exchange."

About 32,000 low-income workers — up to 200% FPL — are currently enrolled in private health insurance through a premium assistance program called Insure Oklahoma. Small business owners and their employees can participate in the program, which subsidizes the qualified employee's premiums in private market health insurance. "That group will, for the most part, end up going through the exchange. Most will continue in private insurance, and some will end up in Medicaid," says Dr. Splinter.

Fiscal impact of reform

To prepare for health reform, Dr. Splinter says, "We are trying to get the whole medical delivery system in Oklahoma seamlessly integrated with electronic sharing of information."

The overall impact on the state's budget is not yet known. Despite the cost of the Medicaid expansion being borne by the federal government for a number of years, this is still a concern.

"Every state is being stressed by budget issues, especially for the coming 2012 fiscal year, so anything that adds to the cost will be a big issue," says Dr. Splinter. "The feds are on one hand saying, 'Get ready to do this big expansion,' and on the other hand saying, 'You'll have to bear some of the costs.' This is at the same time our budgets are being cut."

The state's Federally Qualified Health Centers (FQHCs) may have to change their business model. This is because these centers see a large number of uninsured patients. "They are partly in business to see the indigent care load. If everyone has access to insurance, that's not as large an issue," says Dr. Splinter. "However, access of those pieces of the delivery system will still be needed. The FQHCs will begin to look more like private clinics."

The state's Disproportionate Share Hospitals currently offer a variety of programs to take care of indigent patients, such as free clinics. "They will potentially change the nature of their operations, if everyone has insurance," says Dr. Splinter.

Staffing changes at the state level will be necessary under reform. "If our agency becomes the designated agency for the exchange, or even if it's a different agency, there will be people that get shifted into new jobs," says Dr. Splinter. "We'll have some areas that don't need as much staffing, and we'll have new functions that need to be done."

This type of reorganization occurred previously at OHCA when the SoonerCare (Oklahoma Medicaid) program was transferred to the agency and converted to managed care in 1995. "That will be one of the challenges in balancing the resources to meet the new federal requirements," says Dr. Splinter.

Recovery in sight?

Major cuts to SoonerCare were avoided throughout the recession, in part because of support from the legislature. "At a time when state budgets were decreased overall by 7% or 8%, we were essentially held flat," says Dr. Splinter. "So, in a conservative state with a Democratic governor and a Republican House and Senate, the SoonerCare program came out fairly well in a down budget. That was actually, in many ways, a vote of support by the Republican leadership in the House and Senate for the work of this agency."

As a last option, the provider fee schedule was cut, but no services were cut. A 3.25% across-the-board provider rate cut was made, which was estimated to account for $84 million in total dollars. "We had finally achieved 100% of Medicare rates, and now we are at 96.75%. We hated to have to back off that," says Dr. Splinter. "We thought we would have to do an equal amount again."

For the past few months, enrollment increases have leveled off, and there have been some increases in state revenues. "State revenue has gone up 6.8% YTD from last year and 4% higher than was forecast. So, the state fiscal outlook is looking a little bit better than was anticipated," says Dr. Splinter.

Due to the uptick in revenue, the provider fee schedule cut was dropped for FY 2011. "So far, we are not spending as much time on contingency plans for things getting worse," adds Dr. Splinter.

Contact Dr. Splinter at (405) 522-7365 or garth.splinter@okhca.org.