Gov. Kevin Stitt seeks to privatize Medicaid, faces early opposition

Gov. Kevin Stitt seeks to outsource care for many of Oklahoma’s Medicaid recipients.

Still in the early stages of the process, Stitt’s push to privatize Medicaid by hiring a for-profit company to manage the program’s spending is already facing pushback from some members of his own party.

The Oklahoma Health Care Authority is preparing to solicit proposals for a company or companies to take over care for hundreds of thousands of Medicaid recipients, including pregnant women, low-income parents and children. The chosen companies would oversee spending for low-income adults who will be eligible for benefits under Medicaid expansion.

Care for the state’s aged, blind and disabled population also would be phased in over time.

“Engaging providers through a managed care organization will help us achieve our goal of ensuring Oklahomans receive improved access and quality care,” Stitt said in a statement. “While we do expect cost savings to follow the improved health outcomes, the state will continue to be laser-focused on helping Oklahomans.”

Managed care is an approach to health insurance coverage that seeks to maximize health care quality while cutting costs. Critics say the two goals are diametrically opposed to each other.

Managed care companies are essentially health care middlemen that drive down Medicaid costs, which provides more budget consistency for states. In Oklahoma, conservative leaders often criticize the ever-growing costs of Medicaid, one of the state's most expensive programs.

Details of the privatization push have been limited, leaving lawmakers and health care leaders to wonder what exactly is in store for the future of Oklahoma’s Medicaid program.

Some don’t appreciate being left in the dark.

“I think the Legislature’s been left out of the process,” said Rep. Marcus McEntire, R-Duncan. “The Health Care Authority has the authority to seek out this RFP (request for proposals), but I think it’s important for them to at least get legislative input on what they’re doing because this is big.”

A spokeswoman for the Health Care Authority rejected the notion that legislators have not been included in the managed care conversation.

“We have proactively reached out to legislators to keep them up-to-date throughout the process, and we will continue to do so,” spokeswoman Melissa Richey said in a statement. “We have spent an extensive amount of time working with experts around the country including other state Medicaid agencies to identify best practices and risk mitigation strategies.”

What is managed care?

Under a privatized system, the state gives cash payments to for-profit companies that then cover doctor's visits, prescriptions, long-term care or any other eligible costs.

The fixed payments incentivize managed care companies to cover only the most affordable and effective treatments and encourage patients to be proactive in seeking necessary medical care.

The idea is that if patients get more coordinated care, like regular primary care visits, more severe and potentially costly health problems can be caught early or prevented altogether.

If the companies succeed in driving down costs, they profit from the state’s payments.

Asked what that means for patient care, McEntire, who chairs the House Appropriations and Budget Subcommittee on Health, said that’s the million-dollar question.

The level of care can vary based on the managed care organization that’s hired and how the program is structured, he said. There's also the chance that some of the more costly elements of care won't be covered.

“When you put in a profit motive, there’s always the chance that a treatment gets denied or a referral doesn’t happen,” he said.

From the patient perspective, managed care operates similar to health insurance plans companies offer their employees.

Oklahoma’s history with managed care

Since the 1990s, Oklahoma has tried several times to implement managed care programs with varying levels of success.

In 1995, the Health Care Authority contracted with five managed care companies to serve Medicaid beneficiaries in Oklahoma City, Tulsa and Lawton. In the following years, the SoonerCare Plus program was vulnerable to turnover as managed care companies dropped out and new ones had to be added to the program.

The Health Care Authority also offered a separate managed care program for rural residents called SoonerCare Choice. SoonerCare Choice is still around today.

SoonerCare Plus ended in 2004 after the managed care organizations sought a nearly 20% rate increase the state could not match. The Health Care Authority’s board voted to end the program when only two managed care organizations, the federally required minimum, remained.

New federal managed care regulations are extensive and will allow the Health Care Authority to make sure the plans are compliant, State Medicaid Director Melody Anthony said in a statement.

“Managed care in 2020 looks very different than it did in the early 2000s," she said.

A more recent push to privatize care for some of the state’s Medicaid beneficiaries ground to a halt in 2017 due to a lack of funds to cover the upfront costs. Spurred by some lawmakers, the Health Care Authority pursued privatization for the state’s aged, blind and disabled Medicaid population.

A Legislature divided

The governor’s push to privatize the state’s Medicaid program could set up a fight between his administration and state lawmakers.

Since Stitt assumed office, rumors have swirled that he wanted to implement managed care, said Sen. Greg McCortney, R-Ada, who chairs the Senate Health and Human Services Committee.

Managed care was a big part of the health care debate in the spring when Stitt asked lawmakers to fund his SoonerCare 2.0 proposal. In return for an increase in fees assessed on some Oklahoma hospitals, the Hospital Association wanted assurances the state wouldn’t turn around and outsource Medicaid to out-of-state private insurance companies.

In the end, Stitt appeared to get cold feet about expanding Medicaid in the midst of a global pandemic that is likely to increase the number of people who qualify for Medicaid benefits.

“I have tried for two years to meet with the governor to understand why he thinks this is a good idea, and for two years, that meeting was denied,” McCortney said. “I finally got the meeting. While the meeting was great, three days later I got a call from the governor’s office saying, ‘no, the governor doesn’t really want to talk about this anymore.’”

Sen. Rob Standridge, R-Norman, is already thinking about how lawmakers can intervene.

A pharmacist, Standridge said he anticipates the change will be costly for the state and not conducive to quality care.

Standridge said he would stop being so critical if a majority of the Legislature was on board with the decision. But by his estimation, three-fourths of legislative Republicans and most, if not all, Democratic legislators oppose privatizing Medicaid.

“Through the budget process, I say we just don’t fund it because it’s going to cost a lot the first year and a ton more the years after that,” he said. “I think that’s the only way to do it unless the governor reassesses between now and February.”

Details of the costs will become more clear after the Health Care Authority begins to solicit bids from managed care companies.

Standridge worries a managed care company would agree to oversee the Medicaid population for a specific price, but would ask the state for more money in later years — essentially eliminating any possible cost savings.

Republican legislators, who control the Oklahoma Legislature, are divided on the issue of managed care.

Senate Majority Leader Kim David, R-Porter, has long supported privatizing management of the Medicaid population.

In a statement provided by the Health Care Authority, David said finding a way to control Medicaid costs is important as the Legislature looks for a way to fund the state’s 10% share of Medicaid expansion after state coffers took a hit from the pandemic.

“We must look at how every other state that has expanded Medicaid was able to control costs, as well as ensure the best health outcomes — they contracted with insurance companies to help provide access to care and continued care,” David said.

Healthier Oklahomans is the end goal, she said.

More than 40 states use Medicaid managed care, although the programs can vary from state-to-state.

Oklahoma Hospital Association

The Hospital Association has concerns that privatizing Medicaid care could jeopardize millions in payments made to providers who see Medicaid patients.

Oklahoma could lose roughly $650 million in supplemental payments because of a federal rule that cuts that revenue for states that adopt managed care, said Patti Davis, president of the association.

Managed care companies also don't have to pay out Medicaid claims as quickly as the state, which could create cash flow problems for small, rural hospitals and independent physicians' practices, Davis said.

Typically, the state covers those claims within 14 days, but commercial insurance companies have 45 days to pay, she said.

Davis laid out her concerns in a 13-page letter submitted to the Health Care Authority.

Efforts to improve the health of Oklahomans and control expenses would be best accomplished by building on the strengths of the Health Care Authority's Medicaid program, as opposed to outsourcing care, she wrote.

"There is no clear evidence that outsourcing to MCOs (managed care organizations) saves states money or improves outcomes," Davis wrote. "Medicaid MCOs make billions in profits each year, and add administrative costs in the tens of billions. And that money leads to powerful influence over state governments."

The Health Care Authority is planning for the Medicaid changes to take effect in fall 2021.