Putting Medicaid in the Larger Budget Context: An In-Depth Look at Four States in FY 2016 and FY 2017


Economic and Budget Outlook

Economy and State Revenues

In recent years, Oklahoma has typically accounted for more than 3 percent of total U.S. oil production and almost one-tenth of the nation’s natural gas production.1 It is one of seven states, along with Alaska, Louisiana, New Mexico, North Dakota, Texas and Wyoming, in which the oil and gas sector’s share of the state’s Gross Domestic Product (GDP), personal income and payroll employment is more than 3.5 times larger than in the nation as a whole.2 Because of their heavy reliance on the oil and gas sectors, the economies of these states have been adversely affected to varying degrees by the price of oil which began falling in mid-2014.3 By December 2015, Oklahoma had lost 11,600 energy jobs and 59 percent of the state’s active oil and gas rigs.4 While crude oil prices had partially rebounded by the end of August 2016, they remained below the price in effect a year earlier and less than half of the July 2014 price. 5 6 Oklahoma’s unemployment rate rose for the sixth consecutive month in July 2016 to 5.0 percent (compared to 4.3 percent in July 2015), exceeding the national rate (4.9 percent) for the first time in 26 years.7

8Falling oil prices have also negatively impacted state General Revenue Fund (GRF) collections. At the end of FY 2016, state GRF collections were $541.3 million (9.4%) below official estimates and $521.9 million (9.1%) below prior year collections.9 Oklahoma’s constitution prohibits revenue increases without approval of three quarters of both the House and Senate or a vote of the people, limiting the state’s ability to raise taxes in response to budget issues.10

State Budget

On June 1, 2015, Governor Mary Fallin signed into law the FY 2016 budget, praising legislators for closing a $611 million shortfall without cutting funding for K-12 education. The FY 2016 budget was 1.03 percent less than the FY 2015 appropriated budget.11 By December 2015, low GRF collections, triggered a “revenue failure” declaration which forced across the board spending cuts as well as a one-time appropriation of $500 million from the Day Fund and from other cash reserves to balance the budget.12

As lawmakers worked to balance the FY 2016 budget, they were also faced with a $1.3 billion shortfall for the FY 2017 budget, the largest in the state’s history.13 Public schools feared aid reductions of up to 20 percent while the Oklahoma Health Care Authority (OHCA), which administers the state’s Medicaid program, prepared to implement provider rate cuts of up to 25 percent that would have jeopardized the ability of some hospitals and nursing homes to remain open.14 The final FY 2017 budget, signed into law by Governor Fallin on June 10, 2016, averted these outcomes maintaining current funding levels for the State Department of Education and adding $83.8 million in appropriations for the OHCA (one of four agencies to receive an increase), while also keeping the state’s eight-year transportation infrastructure plan intact.15 16 The FY 2017 budget also eliminated or reduced various tax breaks, relies on a number of dedicated fund transfers including $66 million from the Rainy Day Fund, and $200 million in transportation bonds.17  Overall, the FY 2017 budget of $6.8 billion is $360.7 million (5%) less than the FY 2016 budget prior to the mid-year revenue failure and $67.8 million (1%) less than the FY 2016 appropriations as adjusted by the mid-year revenue failure.18

When the state completed its final reconciliation of FY 2016 state revenues in July 2016, it determined that the mid-year reductions imposed in December 2015 and February 2016 were deeper than necessary and funds were returned to state agencies instead.19

ACA Medicaid Expansion

As a result of the 2012 Supreme Court decision, Oklahoma has not adopted the ACA Medicaid expansion. In April 2016, faced with dwindling reserves, enrollment growth, and budget deficits, Governor Fallin and the CEO of OHCA, Nico Gomez, proposed the Medicaid Rebalancing Act of 2020 legislation, an alternative Medicaid expansion proposal.  The plan would have provided coverage through a Private Option for Oklahomans age 19 to 64 with incomes at or below 138 percent of the federal poverty level (FPL) (similar to Arkansas using Medicaid funds to purchase coverage for enrollees from the Marketplace).  In addition, the plan called for 175,000 pregnant women and children with Medicaid coverage to transition to coverage in the Marketplaces. The proposed plan also called for creating member health savings accounts, called “HealthStead accounts,” that would help pay for medical expenses with financial incentives for healthy lifestyle choices, and partially finance it with an increase in the cigarette tax of $1.50 per pack.20 The plan was expected to reduce the number of uninsured by 30 percent, stimulate the economy and generate state savings of $55 million.21 The Plan failed to receive legislative approval, after some lawmakers labeled it a Medicaid expansion under the ACA. Legislators also could not agree on revenue enhancing measures such as a cigarette tax to help fund the proposal.22

Medicaid Managed Care and Other Payment and Delivery System Reforms

In 1996, Oklahoma implemented managed care, branded as SoonerCare, which initially consisted of two programs: (1) SoonerCare Plus, which contracted with health plans in urban areas of the state using a fully capitated delivery system and (2) SoonerCare Choice – a primary care case management (PCCM) program – which provided services in rural areas of the state. In 2004, SoonerCare Choice expanded statewide and became the sole model of care in the state, supplanting the fully capitated risk based managed care system. This program provided most Medicaid beneficiaries with acute, primary, specialty, and behavioral health services on a fee-for-service (FFS) basis; care coordination services and limited primary care services were covered through a fixed per member per month fee paid to contracted primary care providers.

Since 2004, Oklahoma has implemented other initiatives to promote cost-effective care and improved health outcomes. In 2006, the state began the Health Management Program (HMP) to conduct intensive nurse case management with the highest need patients and facilitate practice transformation. Under the HMP, Oklahoma contracts directly with primary care physicians to provide primary care and care coordination services, and pays them a monthly case management fee that is risk-adjusted to reflect variations in the expected service intensity for patients served in each medical home. Three local non-profit organizations serve as Health Access Networks, which receive a nominal per member per month payment to provide care management to persons with complex needs, in addition to the monthly case management fee paid to individual primary care providers. In 2009, Oklahoma also adopted a patient-centered medical home model for SoonerCare Choice in which primary care providers are paid a bundled care coordination payment and are eligible for additional performance payments; all medical services continue to be paid on a FFS basis. Children and families, pregnant women, children and adults with disabilities, and older adults are mandatorily enrolled in the program; American Indians/Alaska Natives have the choice of selecting either an Indian Health Service (IHS) or non-IHS provider to under SoonerCare.

As of July 2016, 74.8 percent of total SoonerCare enrollees were enrolled in the state’s PCCM program. The state also operates Insure Oklahoma, an Employer-Sponsored Insurance (ESI) program where premium costs are shared by the state (60 percent), the employer (25 percent) and the employee (15 percent).23

Recent Delivery System Reform Initiatives and Quality Improvements

Despite ongoing budget challenges, the OHCA continues to move forward with the delivery system reform and quality improvement initiatives described below.

SoonerHealth+: Care Coordination for the ABD Population

In 2015, the United Health Foundation’s Senior Health Rankings ranked Oklahoma 46th in the nation.24 Several factors considered in this ranking include nursing home quality, hospital readmission rates, chronic health conditions, and community involvement. According to the report, there is a high prevalence of physical inactivity among Oklahoma’s senior population, and a low percentage of seniors in the state receive health screenings and recommended hospital care. This low health ranking suggests that Oklahoma will face additional challenges caring for the baby boomer generation in the years to come.

With the intent of providing better access to care, improving quality and health outcomes, and controlling costs for the Medicaid aged, blind, and disabled (ABD) populations, the state legislature passed legislation in 2015 requiring the OHCA to create an ABD care coordination program. The “SoonerHealth+” program will be a fully capitated program implemented statewide with services beginning in April 2018.25 According to the 2015 legislation, members receiving institutional care will be phased-in two years after the initial program enrollment period. The state expects to release a Request for Proposals (RFP) that includes model contract standards for managed care organizations (MCOs) in November 2016. OHCA plans to use a third party options counselor to assist members with plan choice. PACE will continue to be an option for eligibles in lieu of an MCO. Behavioral Health Homes will also continue to serve qualified members in lieu of MCO enrollment, and MCOs will be required to have Patient Centered Medical Homes for their Medicaid members.26


Oklahoma is one of 14 states and regions recently awarded a Center for Medicare and Medicaid Innovation (CMMI) grant for the Comprehensive Primary Care Plus program (CPC+) program. The five-year multi-payer advanced primary care medical home model grant begins in January 2017 and builds on the earlier Comprehensive Primary Care (CPC) initiative that began in October 2012 and runs through December 31, 2016. The greater Tulsa region is one of seven markets participating in the CPC initiative.27 The CPC+ program will include advances in payment to support primary care practices to provide more comprehensive care that meets the needs of all of their patients, particularly those with complex needs.28

CPC+ has two tracks for physician practices. Track 1 features a relatively simple financial model and less ambitious clinical goals than Track 2. Practices in both tracks are expected to make changes to address key CPC functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement, and (5) planned care and population health. Highlights of the Track 1 model include physician practices receiving a per beneficiary per month (PBPM) care management fee ranging from $6 to $30. In addition, a performance-based payment incentive as high as $2.50 PBPM will be paid to primary care practices at the beginning of a CPC+ performance year. The Track 2 model includes a PBPM care management fee based on a five-tier risk-stratification scale. The lowest four tiers mirror the risk-stratification scale for Track 1, with fees ranging from $9 to $33. In the fifth tier, physician practices can earn a $100 PBPM fee for treating high-risk patients. In addition, a performance-based payment incentive as high as $4 PBPM will be paid to primary care practices at the beginning of a CPC+ performance year.29

Supportive Housing

Recognizing that stable housing is a critical element of healthy living, OHCA staff assist SoonerCare members with affordable housing support services.  In 2016-2017, OHCA will target persons with physical disabilities and persons with intellectual and developmental disabilities for this support, and has created a Social Supports and Outreach unit dedicated to assisting members with housing or other community supports.30

Additional Medicaid policy actions taken in FY 2016 or planned for FY 2017 are described below.

Oklahoma Medicaid Policy Changes FY 2016 and FY 2017
Eligibility Changes
  • No changes
Provider Rates and Provider Taxes/Assessments
  • Provider rates were cut by 3% across the board in 2016 and are equivalent to 86.57% of Medicare rates.
  • Beginning in 2016, the OHCA implemented use of 3M’s Potentially Preventable Readmissions (PPR) methodology for the evaluation and comparison of readmissions rates by hospital. OHCA will reduce payment rates to hospitals determined to have higher rates of readmissions, after applying the PPR method’s risk adjustment. Percentages are being determined.
Benefits and Pharmacy
  • In FY 2016, coverage of sleep studies was eliminated and virtual visits were added as a benefit, with annual limits.
  • In FY 2017, polycarbonate lenses for children are being mandated and covered high risk OB visits are being reduced based on utilization data.
  • Telemedicine policy rules around origination sites were removed. Patients no longer have to be at a specified “origination site” (e.g. they can now be in their homes). OHCA developed an after-hours app for PCs and mobile devices to allow members to find access to care after normal working hours.  The app allows the member to enter age and zip code of current location, and provides locations of urgent care that have agreed to maintain after-hours services.
LTSS, Delivery System and Payment Reforms
  • OHCA expanded the number of persons served in home and community-based services (HCBS) waivers in FY 2016 and plans to do so again in FY 2017.
  • SoonerHealth+, a capitated care coordination program for the ABD population, is under development with an expected RFP release in November 2016. Services are expected to begin in 2018.
  • State selected as a CMMI Comprehensive Primary Care Program Plus (CPC+) grantee with the grant beginning January 2017.
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