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Oklahoma Should Reject Failed Arkansas Medicaid Expansion Model

March 8, 2019

In this Policy Tip Sheet, Matthew Glans examines a new proposal in Oklahoma that would create a new “Oklahoma Plan” for the state’s Affordable Care Act marketplace and why this represents a reform that has already failed in other states.

Problem

Oklahoma’s Medicaid program, known as SoonerCare, has grown rapidly in recent decades. According to the Oklahoma Health Care Authority (OHCA), SoonerCare enrollment has more than doubled in the past 20 years, from 437,969 in 1997 to 1,014,983 in 2017. Despite the recent surge, Oklahoma lawmakers are considering a bill that would further expand SoonerCare. If passed, the bill could add around 200,000 Oklahomans to the Medicaid rolls.

Under Senate Bill 605, OHCA would create a new “Oklahoma Plan” for the state’s Affordable Care Act marketplace. Oklahoma residents making up to 138 percent of the federal poverty level could purchase these subsidized plans. To fund these plans, Oklahoma would request Medicaid expansion dollars from the federal government.

This proposal is similar to the failed model used in Arkansas, who was the originator of premium-assistance model that many states used to expand their Medicaid programs. In 2017, with its Medicaid expansion failing to contain rapidly increasing costs, Arkansas became the first state to enact reforms significantly scaling back Medicaid expansion under the ACA.

In Arkansas, costs expanded far more than expected, driven by a larger than expected expansion population; initial estimates  predicted an expansion population of approximately 215,000 individuals, but by 2016 the expansion ballooned to over 325,000 people.

The Arkansas rollback asked for permission to shrink eligibility for the expanded Medicaid program from 138 percent of the federal poverty level (FPL) down to 100 percent FPL. The reduced eligibility standards is expected to reduce state Medicaid rolls by 60,000 people, or approximately 20 percent of the total Medicaid-expansion enrollment.

Policy Solution

Instead of expanding a flawed Medicaid model that is too costly, delivers subpar health care, and shifts more power to the national government, the state should focus instead on reforming the current system.

Oklahoma should repeal existing state regulations that are obsolete or counterproductive. These reforms include a repeal of mandated benefits, guaranteed-issue, community rating, and anti-free-market certificate of need laws. States can also improve their health care markets by removing unnecessary licensing standards, ending overregulation of dental service organizations, and limiting expensive maintenance of certification requirements.

States should apply to the U.S. Department of Health and Human Services secretary for Section 1115 waivers, giving them more flexibility managing their Medicaid programs, and for Section 1332 waivers, which could help states ease the financial and regulatory burdens imposed by Obamacare.

Policy Message

Point 1: Medicaid is an expensive program that provides very poor-quality care and there is no clear long term source of funding for Medicaid.

Point 2: Obamacare has caused health insurance premiums to increase by an average by 25 percent, pricing millions of people out of the market.

Point 4: A study in Oregon shows that Medicaid does not actually improve health outcomes.

Point 5: States should move forward on free market solutions that lower prices while increase choice in health care.

Point 6: Arkansas has proven that the premium assistance model doesn’t work; it increases costs and provides care to the able bodied who are able to work.

Point 7: States should apply to the Health and Human Services Secretary for Section 1115 waivers. Some reform ideas include:

  • Requirements that able-bodied beneficiaries work, look for work, or prepare for work.
     
  • Cost sharing measures, like premiums and copays along with payment enforcement mechanisms to encourage enrollees to pay cost sharing.
     
  • Time limits on coverage, monthly income verification and eligibility renewals.
     
  • A waiver replacing the traditional federal matching grant with a capped grant.
Article Tags
Health Care
Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR