projecting oklahoma's medicaid expenditure growth under the patient protection and aca

May 2011

Oklahoma Councilof Public Affairs

About OCPA

The Oklahoma Council of Public Affairs (OCPA) is an

independent, nonprofit public policy organization—

a think tank—which formulates and promotes public

policy research and analysis consistent with the

principles of free enterprise and limited government.

OCPA’s speakers don’t disappoint.OCPA’s speakers don’t disappoint.

P R O J E C T I N G O K L A H O M A’ S M E D I C A I D E X P E N D I T U R E G R O W T H • M A Y 2 0 1 1 1

Executive Summary

grown rapidly during the last three decades to con-

stitute 14 percent of the state’s general fund expen-

ditures and to enroll 23 percent of the state’s popu-

lation.2 At a time when the state’s budget deficit is

10 percent of its general fund3, PPACA will only ex-

acerbate the state’s future budget problems by rap-

idly increasing its Medicaid spending commit-

ments—even faster than Oklahoma’s historical

Medicaid spending growth.

PPACA’s effect on Oklahoma’s Medicaid commit-

ments is estimated by constructing and comparing

Medicaid spending projections with and without

PPACA rules. Based on detailed projections of

Oklahoma Medicaid expenditures, our assessment

shows that implementation of PPACA would in-

crease Oklahoma’s Medicaid spending by $11.4

billion during the law’s first ten years (2014-23),

which would represent a 35-percent increase over

estimated ten-year Medicaid spending without

PPACA. Total state Medicaid expenditures under

PPACA would be more than $40 billion during the

first 10 years. We also compare Oklahoma’s histori-

cal Medicaid spending growth with Medicaid

spending growth in other states—California,

Florida, Illinois, New York and Texas.

Unless repeal attempts succeed, the Patient

Protection and Affordable Care Act of 2010

(PPACA) promises to increase state government

obligations on account of Medicaid by expanding

Medicaid eligibility and introducing an individual

health insurance mandate for all U.S. citizens and

legal permanent residents. Once PPACA goes fully

into effect in 2014, the cost of newly eligible Medic-

aid enrollees will be almost completely covered by

the federal government through 2019, with federal

financial support expected to be extended thereaf-

ter. But PPACA provides states with no additional

federal financial support for new enrollees among

those eligible for Medicaid prior to implementation

of the law. That makes increased state Medicaid

costs from higher enrollments by “old eligibles”—

those already eligible for Medicaid but not en-

rolled—virtually certain as they enroll into Medic-

aid to comply with the mandate to obtain health in-

surance. This paper reports our projections of

PPACA’s effect on future state Medicaid spending in

Oklahoma.

State-operated Medicaid programs provide

health care coverage to low-income and disabled

populations. In Oklahoma, Medicaid spending has

2 P R O J E C T I N G O K L A H O M A’ S M E D I C A I D E X P E N D I T U R E G R O W T H • M A Y 2 0 1 1

Background

Created in 1965 under the Social Security Act,

Medicaid is an optional state operated

health program for children, elderly, people with

disabilities and low-income families. The program

is financed with state revenues and federal match-

ing grants determined by a formula that is more

generous toward poorer states. Oklahoma’s regu-

lar federal Medicaid matching assistance percent-

age (FMAP) for 2011 is 64.9 percent—slightly higher

than the average FMAP rate across all states.4 The

2009 American Recovery and Reinvestment Act

(ARRA) is providing temporary relief through higher

federal matching of state Medicaid expenditures,

increasing Oklahoma’s matching rate to 76.1 per-

cent. But high enrollments during the recent reces-

sion mean that state general fund Medicaid expen-

ditures are likely to surge when matching rates re-

vert to normal levels in July 2011.

To receive federal funds, states must satisfy mini-

mum federal coverage rules—such as covering

those who receive Supplemental Security Income,

are deemed disabled, or are over 65 and below 135

percent of the federal poverty income level (FPL).

Children under age six, pregnant women with fam-

ily incomes below 133 percent of FPL, and children

age 6-18 and below 100 percent of FPL must be cov-

ered. States must also cover those eligible for their

Temporary Assistance for Needy Families (TANF)

program.5 These rules ensure that those most medi-

cally and financially vulnerable can receive health

care support when needed. Beyond certain federal

constraints, each state is free to determine the ad-

ditional population groups and types of health ex-

penses that will be covered under Medicaid.

Prior to PPACA, nondisabled adults were only eli-

gible for Medicaid if they had a child and the house-

hold was eligible for cash assistance or the state

received a special waiver. Beginning in 2014,

PPACA expands Medicaid to include all U.S citi-

zens earning less than 133 percent of FPL6 whether

or not they have children or are disabled. Beyond

Medicaid expansion, PPACA also creates an indi-

vidual health insurance mandate, which will induce

most of those already eligible for Medicaid under

pre-PPACA laws to enroll. The federal government

intends to pay almost the entire cost for expanded

eligibility, but new enrollees among those eligible

under pre-PPACA laws will place an additional

strain on the Oklahoma budget.


How Things Stand Today

Oklahoma spent $3.9 billion on Medicaid in

2009—14 percent of its general fund rev-

enues. After subtracting federal funds at the ARRA

enhanced matching rate of 76.1 percent,

Oklahoma’s share of that spending was $930 mil-

lion, which amounts to $580 of taxes per Oklaho-

man worker.7

Currently, 23 percent of the Oklahoma population

is enrolled in Medicaid (828,000 enrollees) at an av-

erage cost of $4,195 per person. A nondisabled

adult on Medicaid in Oklahoma costs nearly $4,500

annually. Figure 1 provides a sense of how Okla-

homa compares with the most populated states in

terms of spending per nondisabled adult enrollee.

California and Florida spend far less at about

$2,000 per enrollee, Illinois spends about $3,000,

Texas spends about $3,750, and New York spends

slightly more than Oklahoma.8

Figure 2 shows Medicaid enrollment counts by

category. Children account for the majority of Med-

icaid recipients. The “other” category consists of

family planning patients, breast and cervical can-

cer patients without insurance, foster care children

and those enrolled in waiver programs. The blind/

disabled eligibles, although comprising just a small

slice of the Medicaid population, account for a

large portion of Oklahoma Medicaid spending, as

shown in Figure 3.9

Figure 1. Medicaid Cost Per Non-Disabled Adult Enrollee

$5,000

$4,000

$3,000

$2,000

$1,000

$0

CA FL IL NY OK TX

Figure 2. Enrollment by Category, 2009 Figure 3. State Costs by Category, 2009


Peering Into the Future

groups—by gender, age, and FPL categories and

separately for special eligibility groups. Detailed

eligibility rules specific to Oklahoma are applied

(with and without PPACA) to determine eligibility

counts from household surveys that provide data

samples representative of the Oklahoma popula-

tion. Enrollment, beneficiary, and spending rate

data are taken from state-wide administrative

records.11 The projections are anchored on Okla-

homa state population projections of the Census

Bureau. Oklahoma Medicaid spending projections

are also constructed under alternative assumptions

about federal matching rates going forward.12

Projections Without PPACA

Freezing nominal Oklahoma Medicaid spending

at the level projected for 2014 without PPACA

(the “freeze baseline”) generates 10-year spending

(during 2014-23) of $20.7 billion. The cumulative 10-

year spending during the same period without

PPACA is expected to be considerably larger: $32.3

billion. This projected spending increase (without

PPACA compared to the freeze baseline) would

arise partly from increased enrollments of 127,000

people—increasing the enrollment share to 27 per-

cent of the state’s population by 2023. As Table 2

shows, the projected composition of enrollees with-

out PPACA is estimated to remain similar to today’s

with enrollments rising steadily over the years just

as during the past decade.

Long-term Medicaid spending projections pro-

vide deeper insights into how PPACA would

change Oklahoma’s Medicaid funding burden, as-

suming its provisions are fully implemented. We

construct Medicaid spending projections with and

without PPACA to estimate the new law’s effect on

Oklahoma’s Medicaid spending. Under both pro-

jections, Medicaid eligibility, enrollments, benefit

recipiency, and spending per recipient are esti-

mated using historical trends from micro-data

sources spanning the years 2000-08 (see Appendix

for more detail).10 The historical trends are pro-

jected separately for detailed population sub-

Projections Under PPACA

Table 1: New Enrollees With PPACA fromExpansion and Mandate

Year 2014 2020 2023

Newly Eligible 217,000 214,000 217,000

Old Eligible 104,000 118,000 142,000

The federal government promises to pay 100 per

cent of health care costs for newly eligible Med-

icaid enrollees during the first three years of

PPACA’s Medicaid expansion (2014-16) and prom-

ises to cover more than 90 percent of their costs

thereafter.13 But Oklahoma’s Medicaid spending

will surge because the federal government will pro-

vide only the state’s regular match rate for those

who were Medicaid eligible but not enrolled under

pre-PPACA laws, also known as the “old eligibles.”

PPACA’s insurance mandate will induce most of

these individuals to enroll into Medicaid. Table 1

shows projected enrollments from PPACA’s Medic-

aid expansion (newly eligible) and from its indi-

vidual mandate (old eligible). Our projections show

that implementation of PPACA will cost Oklahoma

an additional $11.4 billion during 2014-23, bringing

the 10-year spending up to $43.7 billion.

Figure 4 shows projected Medicaid costs for


Oklahoma’s budget from freezing Medicaid spend-

ing at its projected 2014 level (red line), projected

without PPACA (blue line), and projected with

PPACA (black line). In July 2011, the ARRA match

rate enhancement disappears and Oklahoma’s

Medicaid costs shoot up. Under PPACA, spending

spikes in 2014 when the law is first implemented

and increases slightly again in 2017 when the fed-

eral government reduces its match rate for PPACA’s

newly eligible enrollees.

Table 2 shows that under PPACA, Oklahoma’s

Medicaid enrollment is estimated to increase to 1.4

million by the year 2023—or 36 percent of the Okla-

homa population. This represents the projected ad-

dition of 340,000 in Oklahoma Medicaid caseloads

by that year over and above the increase projected

without PPACA. Table 2 also shows the dramatic

change in composition of enrollees under PPACA.

Most of the enrollment increases under PPACA are

predicted to occur among nondisabled adults so

that by 10 years after PPACA’s enactment, they will

constitute more than a quarter of Medicaid

caseloads—significantly more than they constitute

today, as shown in Figure 2.

$8.0

$6.0

$4.0

$2.0

$0.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Figure 4. Oklahoma’s Medicaid Costs

Without PPACA

With PPACA

Baseline 2014

Table 2: Medicaid Enrollments With and Without PPACA by Category (thousands)

2014 2020 2023

Without With Without With Without With

Children 476 497 492 521 500 531

Nondisabled Adult 86 362 86 366 88 372

Aged 65 65 82 82 92 92

Disabled/Blind 102 125 109 133 111 135

Other 171 172 215 215 238 239

Total 901 1,222 984 1,317 1,028 1,369

Enrollment Increase 321 333 340

Bill

ions

of D

olla

rs


Another way to view the effect of PPACA on the

fiscal sustainability of state Medicaid programs is

by comparing projected growth in Medicaid expen-

ditures with the state’s average historical economic

growth—taken as a proxy from how rapidly state

incomes could grow in the future. Figure 5 shows

the historical growth in gross state product (GSP)

for the five most populous states and Oklahoma. It

also shows the projected Medicaid

growth rates over the long-term—

during 2010-30—with and without

PPACA. The historical growth of

Oklahoma’s, California’s, Florida’s

and Texas’ economies was slower

than the states’ Medicaid expendi-

tures, respectively, even without

PPACA. And PPACA worsens the

situtation by accelerating Medic-

aid expenditure growth in all these

states except for California.14

Oklahoma’s Medicaid spending

growth is by far the most rapid of

all of the states shown, with healthcare spending

growth in the double digits. For Illinois and New

York, PPACA causes Medicaid expenditures to

grow faster than those states’ GSPs, making a pre-

viously sustainable program unsustainable. Thus,

PPACA is projected to increase fiscal stress on the

budgets of all these states with the exception of

California.

Alternative Scenarios

The federal government is already feeling the

strain of growing deficits and debt com-

pounded by looming shortfalls in federal entitle-

ment programs. This pressure increases the likeli-

hood of future cuts in federal spending, including

reductions in federal financial support for state

Medicaid programs. Here we look at the effect on

the Oklahoma budget of two alternative ways to re-

duce federal payments after 2019 to support those

made newly eligible for Medicaid under PPACA.15

Table 3 shows the total spending during 2014-23

of these two alternative scenarios in terms of the

freeze baseline spending on Medicaid and the pro-

jections with and without PPACA. Under Alternative

1, the federal government begins to phase out ex-

cess financial support for new eligibles (beyond

Oklahoma’s regular match rate) at a rate of one-

percentage point per year beginning in 2020. The

resulting increase in Medicaid spending under this

alternative is quite small—just $570 million during

2014-23. Under Alternative 2, the federal govern-

ment would fully eliminate extra support for new eli-

gibles at a constant rate over ten years beginning in

2020. Medicaid spending would increase by an ad-

ditional $2.5 billion during the 2014-23 period under

this alternative.

Table 3: Oklahoma’s Medicaid Expenditures(billions of dollars) Under Alternative FederalSupport for New Eligibles (2014-23)

Freeze Baseline ............................................. 20.70Without PPACA ............................................. 32.29With PPACA ................................................... 43.72Alternative 1 .................................................. 44.29Alternative 2 .................................................. 46.20

Figure 5. Medicaid Growth With and Without PPACA andHistorical Growth in Gross State Products (percent)


Recent Policy Proposals in Oklahoma

Oklahoma recently authorized $15 million in

additional federal stimulus funds for Medicaid

through the end of the current fiscal year without

making spending reductions. With ARRA ending,

Oklahoma will have to expend considerable addi-

tional funds on Medicaid beginning July 1 and will

be forced to choose between cutting Medicaid and

cutting other programs. Oklahoma is also propos-

ing a provider fee on hospitals, excluding non-state

owned and speciality hospitals, of 2 to 4 percent of

net patient revenue to be earmarked for Medic-

aid.16 However, this fee proposal does not increase

the funds that hospitals receive for serving Medic-

aid patients, which is fixed given the number and

costs of those patients. These funds would simply

increase state revenues to be devoted to Medicaid,

making the proposal a tax.

The first of these proposals temporarily masks

Oklahoma’s real Medicaid problem—long-term

spending growth. The approach would make next

year’s fiscal shortfall appear even bigger than if

Medicaid spending were reduced beginning in the

current fiscal year. The second proposal is likely to

increase cost shifting from Medicaid to non-Medicaid

patients as hospitals charge the latter more to recover

the additional 2 to 4 percent fee that they will pay.

Policy Options for Oklahoma

The enactment of PPACA is raising concerns

about runaway state Medicaid spending and is

motivating many state policymakers to seek ways to

contain Medicaid expenditures. Beyond the obvi-

ous need to continue efforts to eliminate waste,

fraud, and abuse within Medicaid, state leaders

have a limited range of possibilities to constrain

program costs under the PPACA.

First, Oklahoma could explore the possibility of

opting out of Medicaid completely and could focus

state revenues on providing health coverage exclu-

sively to low-income and disabled groups. Most

policymakers view this option as impractical be-

cause it involves the loss of significant federal

matching funds.

A second option is to seek federal approval to

convert the state Medicaid program into a block

grant program, which would give the state more

control over how program dollars are spent. Block

grants hold the potential of restraining Medicaid

growth because the state would know how much

federal aid it would recieve from year-to-year, as

opposed to the current “as needed” funding

scheme that incentivizes expansion by the promise

of unlimited federal funds. A block grant program

could be paired with a premium-support program,

whereby the state would provide low-income and

disabled individuals risk-adjusted credits or vouch-

ers to purchase coverage from among competing

private plans. Under this model, an individual

would own the plan and could opt to continue pay-

ing for the coverage out of pocket if he or she were

to lose eligibility.

Until a block grant and premium assistance pro-

gram can be implemented, legislators can take the

following actions to slow spending growth.

• Member Cost Sharing: With more than 800,000

Oklahomans receiving Medicaid benefits each

year, a low monthly premium of $10 each month

would return more than $80 million to the pro-

gram annually. Another option is to charge low

premiums on a sliding scale, whereby members

with higher incomes would be charged a slightly

higher premium than low-income members. The

Deficit Reduction Act of 2005 (DRA) provided

states flexibility to make reforms to their Medic-

aid programs, including the permission of states

to charge premiums and require cost-sharing

(co-pays and deductibles) to certain enrollees.

• Long-Term Care Reform: In addition, the DRA


permits states to “rebalance” long-term care

opportunities within their Medicaid programs

away from institutional-based (nursing homes)

care to community and home-based care. Be-

cause such a move creates a service people de-

sire (home-based care versus nursing-home

care), there will be a “woodwork” effect,

whereby demand for the service greatly in-

creases. Because of this increased demand, it is

important for the state to make efforts to control

eligibility in order to effectively rebalance long-

term care services and restrain costs. In addi-

tion, the state should take measures to actively

promote and/or incentivize enrollment within the

Long-Term Care Partnership Program.

• Cut Optional Benefits: Most covered populations

under Medicaid are “mandatory,” though states

are allowed to cover “optional” populations be-

yond those. However, under PPACA’s “mainte-

nance of effort” clause, states are unable to cut

optional eligibility populations until 2014. While

states are prohibited from finding savings by cut-

ting eligibility, no such prohibition exists with re-

gard to optional benefits. Like eligibility, most

benefits covered by Medicaid are “mandatory”

and cannot be cut without federal approval;

however, many benefits are “optional,” and the

state should determine whether cost savings

could be achieved by eliminating some of those

benefits.

Finally, the federal Department of Health and Hu-

man Services has suggested a long list of proposed

changes, but it remains unclear whether these

changes can collectively deliver the needed sav-

ings to make Medicaid affordable.17 Thus, policy

options for state lawmakers remain limited, unless

the constitutional court challenges joined by sev-

eral states succeed in effectively repealing PPACA.


Conclusion

With 36 percent of the population projected to

be on Medicaid by 2023 under PPACA and

with continued escalation in per-patient health

costs, Oklahoma Medicaid expenditures are pre-

dicted to balloon by another $11.4 billion beyond

the increase projected without PPACA. To avoid

making deep cuts in other public services and to

maintain the state’s economic competitiveness by

avoiding tax increases, Oklahoma lawmakers will

have to enact stronger policies to control the huge

Medicaid spending growth that the state will expe-

rience under PPACA. However, there appear to be

few avenues to constrain Medicaid spending given

the prohibitions under PPACA for reducing pro-

gram eligibility rules. Although ongoing court chal-

lenges inject uncertainty about the eventual imple-

mentation of PPACA’s laws, state lawmakers need

to proactively explore ways to contain surging Med-

icaid expenditures during coming decades.

1 0 P R O J E C T I N G O K L A H O M A’ S M E D I C A I D E X P E N D I T U R E G R O W T H • M A Y 2 0 1 1

Appendix: Methodology for Projecting Medicaid Expenditures

The Medicaid Statistical Information System

(MSIS) State Datamart website provides adminis-

trative information on the number of Medicaid en-

rollees (N_MSIS) and beneficiaries (R_MSIS) by

gender (g), age category (a)18 and eligibility group

(e) for years 1999–08. It also provides information on

total Medicaid benefits (B_MSIS) awarded to state

residents.

First, the total population for the state in question

is calculated by gender, age category, income

range (f) 19 relative to the federal poverty level (FPL),

and year (t), based on data from the Current Popu-

lation Survey, CPS_STTPOPg,a,f,t, where the suffix,

STT, stands for the state in question. Because the

CPS undercounts state populations relative to Cen-

sus Bureau counts for all states, the census popula-

tion CEN_STTPOPg,a,t is also categorized accord-

ing to gender, age category, and year cells’ and the

latter population is used to rescale CPS population

counts: For each demographic cell, the ratio of the

two populations

CPS after applying the eligibility rules and the

population adjustment ratio, Ug,a,t (described above).

Next, the enrollment rate, n, is calculated as the

number of Medicaid enrollees divided by the num-

ber of Medicaid eligibles:

provides a measure of the cell-specific population

overcounts or undercounts in the CPS relative to the

census population. Next, populations of the state’s

Medicaid benefit-eligible individuals (E_CPS) by

demographic cells are calculated from the CPS.

These cells are calculated separately for specific

income ranges (f) relative to FPL values.

Take a male aged a in 2008. Non-disabled adults

qualify for Medicaid coverage if they have a child

and are eligible for cash assistance. Thus, the eligi-

bility rate, e, for adults aged a of gender g with FPL-

relative income f and in year t can be calculated as:

Ug,a,t=CEN_STTPOPg,a,t

ΣfCPS_STTPOPg,a,f,t

Here, the numerator refers to the total number of

state residents found to be Medicaid eligible in the

eg,a,f,t=U

g,a,t x E_CPS

g,a,f,t

Ug,a,t

x CPS_STTPOPg,a,f,t

Here, the numerator is the total number of male

state residents aged a of gender g in year t who are

enrolled in Medicaid based on data obtained from

the MSIS. One limitation of the data from the MSIS

is that they are not decomposed by FPL-relative in-

come categories. Therefore, the average age-gen-

der enrollment rate is applied to all three FPL cat-

egories. Next, the recipiency rate, r, is calculated as

the number of Medicaid recipients (or beneficia-

ries) among Medicaid enrollees:

ng,a,t=N_MSISg,a,t

Ug,a,t

x ΣfE_CPS

g,a,f,t

Again, data for the number of state residents who

received Medicaid benefits are obtained from the

MSIS. Finally, average Medicaid benefits per re-

cipient, b, in the state in question are calculated

from the MSIS as:

where the numerator refers to total Medicaid ben-

efits for this group. The average age-gender ratios

rg,a,t and bg,a,t are applied to those who are Medicaid

eligible in each FPL-relative income category. Thus,

total state Medicaid expenditures (M) in 2008 on

males aged a, gender g, FPL category f, and year t,

can be represented as:

Mg,a,f,t = Ug,a,t x CPS_STTPOPg,a,f,t x eg,a,f,t x ng,a,f,t x rg,a,f,t x bg,a,f,t

This method of calculating the four rates can be

applied to all age groups and both genders and ag-

gregated to yield total (MSIS-based) Medicaid ex-

rg,a,t=R_MSISg,a,t

N_MSISg,a,t

bg,a,t=B_MSIS

g,a,t

R_MSISg,a,t

P R O J E C T I N G O K L A H O M A’ S M E D I C A I D E X P E N D I T U R E G R O W T H • M A Y 2 0 1 1 1 1

penditures for the year in question.

Total Medicaid expenditures derived in this man-

ner for the base year (2008) are benchmarked to

total (expended) Medicaid expenditures in 2008 as

reported in the state budget. This step takes ac-

count of Disproportionate Share Hospital and Up-

per Payment Limit expenditures that are not in-

cluded in MSIS data. Thus, these additional expen-

ditures are implicitly distributed across age, gen-

der, and eligibility categories in the same propor-

tion as the state’s Medicaid expenditures included

in MSIS data.

The simplest way to project states’ Medicaid ex-

penditures for future years is to represent total ex-

penditures in earlier years by age and gender,

Mg,a,f,t, where t=2001–08, as above, and to extrapo-

late each of the component elements over future

years. The product of those terms in future years

provides estimates of future Medicaid expenditures

in the state for each particular gender, age, and

FPL category. Summing over all categories pro-

vides the future year’s total Medicaid expenditures.

Calculating and independently projecting each

of these component rates captures different policy

or environmental factors, each with the potential to

exhibit its own future trend. For example, while the

Medicaid eligibility rate for a particular population

sub-group is determined by federal and state poli-

cies about which types of individuals should qualify

for Medicaid benefits, enrollment rates for different

population sub-groups may be determined by the

availability and cost of alternative health insurance

coverage, individuals’ perceptions about their

health care needs, the quality and out-of-pocket ex-

penditures of Medicaid’s health care provision, and

public awareness about the availability of Medic-

aid coverage for people with similar demographic,

economic, and health characteristics.

Furthermore, Medicaid recipiency rates could

vary among different population sub-groups by

age, gender, and other characteristics, depending

on their frequencies of adverse health episodes

and health service needs. Finally, average benefit

rates would differ depending on the incidence of

chronic conditions; whether recipients are elderly

or disabled; the type, quality, and cost of health

care treatments that are locally available; and so

on. Basing projections on detailed historical infor-

mation on the group-specific trends of all four com-

ponents separately—by age, gender, whether dis-

abled, income level (relative to the federal poverty

level), whether medically needy, unemployed,

single- or dual-headed family, child status, etc.—

provides greater confidence that the rich variety of

independent influences of policies, environmental

conditions, and behavioral propensities on Medicaid

expenditures has been adequately accounted for.

1 2 P R O J E C T I N G O K L A H O M A’ S M E D I C A I D E X P E N D I T U R E G R O W T H • M A Y 2 0 1 1

Notes and Sources

growth rate was faster during the 2000-05 period thanduring the years after the policy change. Adjustingprojections to account for this policy change has anegligibly small effect on projected growth in stateMedicaid spending.

11 Data from the Census Bureau’s Current PopulationSurvey and the MSIS are used.

12 The methods are described in Jagadeesh Gokhale, “TheNew Health Care Law’s Effect on State Medicaid Spend-ing: A Study of the Five Most Populous States.“ CatoInstitute White Paper no. 31, April 6, 2011 (http://www.cato.org/pub_display.php?pub_id=12967) and inJagadeesh Gokhale, “Final Notice: Medicaid Crisis: AForecast of Texas’ Medicaid Expenditures Growth.” TexasPublic Policy Foundation report. December 2010 (http://www.texaspolicy.com/pdf/2010-12-RR12-FinalNoticeMedicaidCrisis-ForecastofTexasMedicaidExpendituresGrowth-CHCP.pdf).

13 For Oklahoma the federal government will cover 95percent of new eligibles according to Section 1905 sub. (b)of the Social Security Act.

14 Cost savings from Disproportionate Share Hospital (DSH)payments to hospitals for the uninsured are estimated tooutweigh the PPACA-induced spending increases in Cali-fornia due to the number of uninsured people who will be-come insured but are not eligible for Medicaid.

15 PPACA specifies the additional matching rate for new eli-gibles for “2019 and succeeding years.“ See Social SecurityAct, Section 1905 [42 United States Code 1396d]. Here weexplore alternatives wherein the matching rate applicablein 2019 will be gradually reduced beginning in 2020.

16 See Oklahoma House Bill 1381: http://e-lobbyist.com/gaits/drafts/258383.

17 Kathleen Sebelius, “Sebelius outlines state flexibility andfederal support available for Medicaid - Full Letter.“ Febru-ary 3, 2011U.S. Department of Health and Human Servicesnews release. (http://www.hhs.gov/news/press/2011pres/01/20110203c.html).

18 The age categories correspond to those of the MedicaidState Information System’s age ranges: 0, 1–5, 6–12, 13–14,15–18, 19–20, 21–44, 45–64, 65–74, 75–84, and 85+.

19 The income ranges are defined according to the appli-cable cutoffs before and under the new health care law.Those cutoffs are generally different for population groupsserved by various Medicaid programs.

1 Jagadeesh Gokhale, Ph.D., is a senior fellow and AngelaC. Erickson is a research assistant at the Cato Institute,Washington, D.C. Jason Sutton, J.D., is Policy ImpactDirector at the Oklahoma Council of Public Affairs,Oklahoma City, Oklahoma. This paper borrows heavilyfrom Jagadeesh Gokhale, “The New Health Care Law’sEffect on State Medicaid Spending: A Study of the FiveMost Populous States.” Cato Institute White Paper no. 31,April 6, 2011. (http://www.cato.org/pub_display.php?pub_id=12967)

2 Based on the authors’ calculations using MedicaidStatistical Information System (MSIS) (http://msis.cms.hhs.gov/), Census Bureau population counts(http://www.census.gov/population/www/projections/projectionsagesex.html) and National Association of StateBudget Officers (NASBO) general revenue expenditurereports (http://www.nasbo.org/Publications/StateExpenditureReport/StateExpenditureReportArchives/tabid/107/Default.aspx).

3 Elizabeth McNichol, Phil Oliff, and Nicholas Johnson,“States Continue to Feel Recession’s Impact.” Center onBudget and Policy Priorities report. March 9, 2011. (http://www.cbpp.org/cms/?fa=view&id=711.)

4 Federal matching percentages are published in theFederal Register, 74, no. 227 (November 27, 2009), avail-able at http://aspe.hhs.gov/health/fmap11.htm.

5 Each state has its own TANF program with differenteligibility standards, deductions, and income levels. Eachstate determines whether to have an asset test to deter-mine Medicaid eligibility. Oklahoma’s eligibility rules donot include an asset test. Special eligibility categories inOklahoma do not include a “medically needy“ group.Under the Social Security Act, states can elect whether todefine a special “medically needy “ category. Thus, costsand enrollments vary widely across states for this categoryof beneficiaries.

6 133 percent of the poverty level is $14,484 for an indi-vidual and $29,726 for a family of four. See http://www.coverageforall.org/pdf/FHCE_FedPovertyLevel.pdf.

7 Based on the authors’ calculations using the MSIS,NASBO general revenue numbers, federal FMAP levels,and Bureau of Labor Statistics’ state employment numbers(http://www.bls.gov/sae/).8 Based on the authors’ calcula-tions using the MSIS.

9 Authors’ calculations are based on data from the MSIS.

10 Oklahoma increased provider reimbursements in 2006.This increased Medicaid spending by less than $20million, or 2 percent of the state’s Medicaid spending. SeeOklahoma Health Care Authority State Fiscal Year 2006Annual Report, http://www.okhca.org/reports/pdflib/AR_2006.pdf. Oklahoma’s historical average Medicaid

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