Jay Johnson at Oklahoma Capitol

Jay Johnson, chairman of the Oklahoma Hospital Association, speaks out against privatizing Medicaid during a press conference April 20 at the Oklahoma Capitol.

A$2.2-billion plan to privatize Medicaid in Oklahoma has generated a flurry of dubious claims by both supporters and opponents.

Under a proposal backed by Gov. Kevin Stitt, four private health insurance companies would handle much of Oklahoma’s Medicaid program starting in October: Blue Cross and Blue Shield of Oklahoma; Humana Healthy Horizons; Oklahoma Complete Health, which is a subsidiary of managed care giant Centene; and United Healthcare.

The shift to managed care has drawn criticisms from the Oklahoma State Medical Association; Oklahoma Osteopathic Association, the Oklahoma Hospital Association and and the state’s chapter of the American Academy of Pediatrics among others.

Providers claim privatization would increase administrative costs while cutting patient services. Supporters of the plan claim privatization would improve health outcomes by providing more preventative care as well as reduce costs.

The Frontier used public records, academic studies and interviews with public health officials to fact check these claims and others.

Claim: “The supposed benefit of switching to Medicaid managed care is to create savings for the state. The catch? To create those savings, insurance companies will reduce services to Medicaid patients by up to 40%,” a coalition of health care providers claimed on Twitter.

Fact check: Mostly False.

Managed care companies aren’t expected to reduce services to Medicaid patients by 40 percent across the board.

Each year, states are tasked with setting capitation rates, which are set per member per month rates that states pay to managed care companies for Medicaid services. The Centers for Medicare & Medicaid Services must approve the rates annually.

Under federal rules, the Oklahoma Health Care Authority is required to develop actuarially sound rates, meaning rates must be “projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the” managed care plan.

To develop those rates, Oklahoma projected that hospitalization services for Medicaid clients would be reduced by 40 percent. The idea is that there would be an increase in primary and preventative care utilization, making hospitalization services less necessary, state health officials said in an interview.

The projection isn’t a mandate and “has nothing to do with what we expect the plans to do in terms of reducing utilization,” said Oklahoma Health Care Authority CEO Kevin Corbett.

“It has nothing to do with what we’re going to require in terms of honoring medically-necessary services,” Corbett told The Frontier. “It’s simply a mechanism for us to have some level of support and justification for the rates we want to pay our plans.”

Still, some analysts are concerned the projection could result in patient denials to keep managed care companies’ costs low.

And if the state’s projections are wrong and health care costs exceed capitation rates, the state is financially on the hook, said Emma Morris, a health care and revenue policy analyst for the Oklahoma Policy Institute.

Morris said it’s possible managed care could reduce hospital utilization, but it’s unlikely to fall by 40 percent, especially as the state expands Medicaid to about 200,000 adults. That population will likely have some pent-up demand for health care services.

Claim: “Managed care will improve health outcomes for 25% of our state’s population that depend on Medicaid,” the Oklahoma Health Care Authority claimed on Twitter.

Fact Check: Unproven.

The research on how managed care affects health outcomes is mixed.

Managed care can and sometimes does provide Medicaid members with improved access to health care, but the outcomes have largely varied by state, according to an in-depth 2012 study from the Robert Wood Johnson Foundation, a health-care philanthropy based in Princeton, New Jersey.

Some studies have found that adult members have lower emergency room utilization and better access to a primary care provider. Other research has concluded that managed care can lead to better access to regular, preventative care when compared to fee-for-service programs.

On the other hand, several studies found that access to health care under a managed care plan was reduced or unchanged. One study found managed care didn’t increase primary care provider participation in Medicaid programs.

Claim: “Oklahoma’s current Medicaid program is considered nationally to be a model of efficiency, with administrative costs averaging less than 5 percent … When states shift Medicaid administration to for-profit insurance companies, the administration cost escalates to as much as 15 percent,” according to the vice president of the Oklahoma Nurses Association.

Fact check: True.

Over the last five fiscal years, the Oklahoma Health Care Authority has reported spending less than 5 percent of its budget on its administrative costs, according to several state budget reports.

The approved managed care contracts only require the private companies to spend 85% of funding directly on health care services, leaving 15 percent to cover administrative or other costs.

OHCA says in reality, the companies spend more than 85 percent on training, education and coordinating health care. But they are not required to do so.

Claim: “In the 1990s, Oklahoma already tried this approach. The state implemented a managed care model and the results were disastrous,” Dr. George Monks, president of the Oklahoma State Medical Association wrote in an Aug. 20 letter to Oklahoma Secretary of Health Kevin Corbett.

Fact check: Mostly true.

Oklahoma launched a managed care model called SoonerCare Plus for Medicaid participants in the 1990s, but the program was never statewide and was only available for residents in the urban centers of Oklahoma City, Tulsa and Lawton.

In hopes of controlling the state’s growing Medicaid costs, Oklahoma enacted legislation in 1993 to shift the state toward a privatized system. But the Oklahoma Health Care Authority determined using managed care wasn’t feasible in rural parts of the state, according to a state-commissioned report by Mathematica Policy Research.

The Health Care Authority launched SoonerCare Plus in 1995 with five managed care organizations to serve urban areas, but three of the original five dropped out between 1996 and 2000, destabilizing the system.

Managed care organizations also saw their costs increase when Oklahoma began enrolling older, blind and disabled Medicaid beneficiaries with more expensive, medically complex needs in SoonerCare Plus in 1999.

Between 2002 and 2003, Oklahoma saw increased Medicaid enrollment and reduced state revenues due to an economic downturn. At the same time, managed care organizations were pushing the state for higher payments to cover their rising costs.

By 2003, the remaining three MCOs asked Oklahoma for an 18 percent rate increase.

In an emergency meeting in November 2003, The OHCA board voted to end the Plus program after it determined it could serve Medicaid beneficiaries in the state’s urban areas with less administrative costs and fewer staff than the HMOs.

Claim: The current administrative system under the Health Care Authority is efficient and working well, several health care providers have written in opinion pieces and said in press conferences.

Fact Check: Mostly true.

The administrative functions of OHCA do seem to be working well, according both to OHCA and health care providers around the state. Administrative costs for the agency are low, and providers say they receive payments quickly and generally feel included in discussions about paying for care.

But state Secretary of Health Kevin Corbett said the choice to switch to managed care isn’t a question of whether OHCA’s current delivery system is working efficiently, it’s that some state officials believe a new delivery system is needed to improve health outcomes.

Under federal law, OHCA as a state agency has restraints on which services it can pay for. Managed care companies, in contrast, have the flexibility to pay for a wider variety of preventive care treatments.

“What we’re doing today, we do it very efficiently,” Corbett said. “It’s just not what we need to be doing.”

The Frontier is a nonprofit, independent news source based in Tulsa. Frontier content is republished in The Transcript through a special content agreement. For more information on The Frontier, visit readfrontier.org.

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