If someone offered to make you healthier and wealthier, would you take it? Apparently, some Oklahoma officials would not. In the past few weeks Oklahoma officials have rejected an offer to pump billions of dollars into the state economy and improve health care access for thousands of Oklahomans.
As a part of the Affordable Care Act, states have the option of expanding their state Medicaid programs to cover adults earning less than 133 percent of the federal poverty level. To assist states in making this expansion, the federal government will pay 100 percent of the expansion costs during the first three years of the program, and progressively smaller percentages until they pay 90 percent of the costs in 2020. By that time, the cost to Oklahoma taxpayers, according to various estimates, will be $25 million to $40 million/year (using conservative estimates the Oklahoma Health Care Authority cost to Oklahoma in 2020 would be $28.6 million). Meanwhile, the federal government will be sending an additional $225 million to $400 million to Oklahoma health care providers and an additional 180,000 Oklahoma adults would have insurance coverage.
Despite the promise of billions of dollars in new economic activity, on Nov. 19 Gov. Mary Fallin informed the Obama Administration that the State of Oklahoma would be rejecting the billions in federal dollars the state could collect for expanding its Medicaid program. Citing the estimated cost of the expansion, the governor claimed that the program would “require cuts to important government priorities such as education and public safety.” In short, the governor says we cannot afford to do this.
A careful evaluation of the evidence though, shows that we cannot afford to not do this.
There are several reasons why accepting the Medicaid expansion money will result in a financial benefit to Oklahoma. First and foremost, by choosing to expand Medicaid an estimated $270 million to $360 million of federal funds will flow to Oklahoma health care providers each year. This means extra income, extra spending and extra tax collections. According to an OSU economic impact study, the Medicaid expansion would produce more than 9,000 new jobs and nearly $30 million in additional state income and sales tax collections. Remember, initially that benefit comes at no cost to the state. By 2020, an additional 9,000 jobs, $280 million increase in payrolls and $30 million in additional state tax revenues costs only $28 million in state spending.
But that’s not all. Oklahoma already spends nearly $50 million annually providing health care services to the uninsured population through the Departments of Health and Mental Health and Substance Abuse Services. Of course, only a portion of this serves the population that would potentially be covered under the proposed Medicaid expansion. But if Oklahoma was to expand its Medicaid program the federal government will pick up 90 percent of these costs for that population too.
Furthermore, across Oklahoma the uninsured population consumes an estimated $600 million of uncompensated care costs annually (according to the Oklahoma Hospital Association) — the health care consumed by mostly uninsured people who never pay for their care. As a result, these uncompensated care costs raise the costs of health care for everyone meaning the insured population must absorb some of this cost in the form of higher premiums. By covering more Oklahomans, this proposal would reduce the uncompensated care costs borne by taxpayers and the insured population.
In short, the proposed Medicaid expansion would provide billions of dollars of additional economic activity over the next decade with little cost to taxpayers (thanks to cost-savings elsewhere and additional revenue generated). Meanwhile, an additional 180,000 Oklahomans would enjoy the security of having health insurance coverage.
From an anti-poverty perspective, turning down billions of federal dollars for Medicaid was a mistake. From an economic development perspective, it was a mistake — an incredible opportunity wasted. Healthier and wealthier? Apparently not in Oklahoma.
MICKEY HEPNER is the dean of the College of Business Administration at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.