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This reproduction is the best copy available UMI UNIVERSITY OF OKLAHOMA GRADUATE COLLEGE MEDICAID AND THE POLITICS OF STATE HEALTH CARE REFORM A Dissertation SUBMITTED TO THE GRADUATE FACULTY in partial fulfillment of the requirements for the degree of Doctor of Philosophy By SHAD BRENT SATTERTHWAITE Norman, Oklahoma 1998 UMI Number: 9828778 UMI Microform 9828778 Copyright 1998, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. UMI 300 North Zeeb Road Ann Arbor, MI 48103 ©Copyright by SHAD BRENT SATTERTHWAITE 1998 All Rights Reserved MEDICAID AND THE POLITICS OF STATE HEALTH CARE REFORM A Dissertation APPROVED FOR THE DEPARTMENT OF POLITICAL SCIENCE BY ( l i Ack nowledgmGn ts This dissertation is not only the compilation of my research over the last two years, it is also the result of many hours of support and guidance on behalf of my family, friends, and advisors. I feel it is only appropriate to acknowledge those who contributed so much to this work. My wife Valerie perhaps shouldered the greatest burden, sacrificing her time and energies to assist me with this project. It was truly a team effort whether she realizes it or not. She responded to countless requests for "dad" when I was occupied at the computer and she seemed to keep the world turning smoothly while I was researching health care policy. Her encouraging words never fell on deaf ears. Without her love and support, I couldn't have completed this project. This dissertation is dedicated to her. David Ray has been a wonderful mentor and friend. He served as my advisor from the beginning of my graduate program. His 1113 Political Science class has had as much of an impact on m.y training as any graduate course that I enrolled in. He helped me get started on this dissertation and made sure that I was on track up to the end. His comments and suggestions were always welcome. He is an outstanding teacher in the true sense of the word. Gary Copeland has also served on my doctoral committee from the beginning. He is one of the most insightful i V professors I have had the pleasure to associate with. He taught me that political scientists not only have an obligation to students, but to the community as well. He is an excellent example of someone who tries to make the world a better place through teaching and service. When I arrived at the University of Oklahoma in 1992, the first person I sought advice from was David Morgan. I found that I never stopped turning to him for advice. No matter how busy he was, it seemed he always had time to talk to me as well as many other graduate students. He has been a great editor, offering me several suggestions for my dissertation. Jim Douglas was a very inspirational committee member. As someone who was in my shoes not long ago, he always offered words of encouragement. I appreciated his willingness to serve on my committee as well as his friendship. I am grateful to all of the legislators, staff, and administrators working for the state of Oklahoma. They not only provided me with valuable information, but they made this project enjoyable. My parents Brent and Dottie Satterthwaite have always supported me in my interests. Throughout my life they provided me with love and encouragement. While it is V impossible to pay them back for all that they have given me, I want them to know that I love and appreciate them. Finally, one of the biggest daily rewards I have received is to be welcomed, surprised, or tackled by my children Megan, Tanner, and Pace when I came home from school. I am grateful for their patience in prolonging some of our activities while I was studying. I am grateful for my wife who continued to remind them that patience is a virtue whether they understood it or not. My family is my life. VI TABLE OF CONTENTS LIST OF TABLES.................................. viii LIST OF FIGURES................................. ix ABSTRACT........................................ x CHAPTER I. INTRODUCTION.......................... 1 II. MEDICAID: NOT 1, BUT 56 SEPARATE PROGRAMS.............................. 21 III. MANAGED CARE AS STATE POLICY INNOVATION........................... 59 IV. MEDICAID REFORM IN OKLAHOMA.......... 90 V. THE CONTEXTUAL AND DYNAMIC FACTORS IN STATE MEDICAID REFORM................ 127 VI. ANALYSIS AND CONCLUSION.............. 171 APPENDICES...................................... 201 REFERENCES...................................... 212 Vll LIST OF TABLES TABLE PAGE 2.1 Medicaid Eligility for Families, 1987.... 25 2.2 Optional Medicaid Services and Number of States Offering Each Service, 1995.... 31 2.3 The Federal and State Partnership in the Medicaid Program..................... 32 2.4 Medicaid Expenditures and Enrollees per 1000 below the Federal Poverty Line..... 35 3.1 Probit Results for Event History Analysis Model of Managed Care Adoption............ 82 3.2 Probability of Managed Care Adoption under Various Scenarios.......................... 8 6 4.1 National/State (Oklahoma) Demographic Comparison................................. 91 4.2 National/State (Oklahoma) EHA Variable Comparison................................. 91 4.3 Proponents and Opponents of State Question 647............................... 103 5.1 General Factors in a Model of State Health Care Reform................................ 128 5.2 Rank Order of Managed Health Care Information Sources....................... 138 5.3 Specialist Legislators (on Health Care) in the Oklahoma Legislature, 1993-1996.... 142 5.4 Factors Influencing Legislators Votes for Managed Care........................... 147 5.5 Public Rankings of Groups for Financial Assistance................................. 155 6.1 Managed Care Enrollment Levels in Oklahoma: Urban HMOs and Rural PCPs...... 181 6.2 Oklahoma City Acute Care Hospitals and Their HMO Affiliations.................... 191 viii LIST OF ILLUSTRATIONS FIGURE PAGE 1.1 Annual Growth Rate of Medicaid Expenditures, 1985-1996.................. 12 2.1 Growth in Medicaid Expenditures, 1981-1996................................. 37 2.2 Growth in Medicaid Enrollees, 1981-1996.. 37 2.3 Types of Managed Care Used by Medicaid 1994...................................... 51 3.1 States with or Applying for 1115 Waivers in 1991................................... 75 3.2 States with or Applying for 1115 Waivers in 1993................................... 75 3.3 States with or Applying for 1115 Waivers in 1994 ................................... 76 3.4 States with or Applying for 1115 Waivers in 1998................................... 76 2.4 Survey Results Identifying Health Care as the Most Important Problem............... 54 5.1 Medicaid Payments by Type of Service...... 156 5.2 Comparison of Medicaid and Medicare Payments for the Aged.................... 157 5.3 Two-Stage Model of Information Flow...... 163 5.4 Three-Stage Model of Information Flow.... 164 IX Medicaid and the Politics of State Health Care Reform Abstract This dissertation focuses on state policy innovation among Medicaid programs. Budget constraints and a Republican Congress have led states to become more resourceful in the ways which policies are implemented. Medicaid provides a good example, illustrating how many states have adopted managed care in an effort to reduce costs and broaden health care coverage. I too argue that states draw lessons from other states and that ideas pass through the medium of informal networks within state legislative bodies. I further contend that the adoption of managed care for Medicaid recipients is also influenced by other factors indigenous to a state. These factors create a context favorable to reform. To illustrate, I rely on data derived from a pooled cross-sectional time series analysis using variables such as the number of uninsured, the fiscal health of a state, and the number