Health Care

Kaitlyn Finley | May 28, 2020

Medicaid expansion the wrong path for Oklahoma

Kaitlyn Finley

Efforts to grow government and increase welfare by expanding Medicaid were stalled last week thanks to Governor Kevin Stitt’s veto pen. Governor Stitt vetoed SB 1046, which would have increased the provider tax on select hospitals up to four percent to partially fund SoonerCare 2.0. The Legislature chose not to override the veto.   

Thus, no agreement was reached this session between the Legislature and Gov. Stitt on how to fund SoonerCare 2.0, Gov. Stitt’s plan to expand Medicaid coverage to hundreds of thousands of able-bodied adults. 

The Legislature estimated that $164 million in state funds would be needed to extend Medicaid coverage for an additional 220,000 adults beginning this July. But these cost and enrollment estimates are likely low as they were calculated before the COVID-19 outbreak and the sharp downturn in economic activity. 

“Due to the current COVID-19 pandemic and uncertainty within energy markets … unemployment rates are predicted to be as high as 14%,” Gov. Stitt wrote in his veto message. “This will not only increase the number of individuals currently enrolled in Medicaid, but will also increase the number of potential enrollees in the expanded population.” 

Even before COVID-19, nearly every state that expanded Medicaid under Obamacare drastically underestimated cost and enrollment, putting their already-stretched state budgets in a bind. 

According to a report from the Foundation for Government Accountability, a nonpartisan think tank, the first 25 states that expanded were hit with higher than expected enrollment costing taxpayers 157 percent more than what state officials promised. 

More than a dozen states have had to raise taxes, increase fees, or cut provider rates in order to fund Medicaid expansion. 

Governor Stitt was right to veto this flawed funding scheme. Reports from the Mercatus Center and the National Conference of State Legislatures have explained how the provider tax is a ruse that allows states to draw down more federal funds while later returning the money back to providers.   

“In most states, [the provider tax] is used as a mechanism to generate new in-state funds and match them with federal funds so that the state gets additional federal Medicaid dollars. In a majority of cases, the cost of the tax is paid back to providers through an increase in the Medicaid reimbursement rate for their patient treatment and services.” 

This so-called tax increase on hospital providers may also give large hospital systems political cover to increase service prices and pass higher “costs” along to consumers, resulting in premium increases.    

In 2011, Vice President Joe Biden admitted that provider taxes are a scam during budget negotiations with Congress.  

Due to a clear lack of funding, it is unlikely SoonerCare 2.0 will be implemented this summer as was initially planned. But setting aside whatever flawed funding mechanisms politicians promise to pay for expansion, the bottom line is that expanding the program is the wrong policy move for Oklahoma. 

Oklahoma’s Medicaid program needs real targeted reforms to help rural health care in Oklahoma, as well as robust enrollment integrity—not hundreds of millions of more taxpayer dollars blindly thrown in the mix.

The State Auditor’s office is set to release an audit of the state’s current Medicaid rolls this summer. New audit systems may be needed to address ways in which the Oklahoma Health Care Authority is not able to properly determine eligibility. 

Recent audits from other states that expanded Medicaid, such as Louisiana and New York, found they were not able to properly determine eligibility in their Medicaid programs, thus costing taxpayers tens of millions of dollars. With a budget shortfall likely next year, Oklahoma has no room to allow fraud and to waste taxpayer dollars. 

Oklahoma cannot afford to overwhelm the state’s Medicaid program and further squeeze the state budget. Expanding expensive welfare entitlements under Medicaid to hundreds of thousands of able-bodied adults would be the worst path forward for Oklahoma.

Kaitlyn Finley Policy Research Fellow

Kaitlyn Finley

Policy Research Fellow

Kaitlyn Finley currently serves as a policy research fellow for OCPA with a focus on healthcare and welfare policy. Kaitlyn graduated from the University of Science and Arts of Oklahoma in 2018 with a Bachelor of Arts in Political Science. Previously, she served as a summer intern at OCPA and spent time in Washington D.C. interning for the Heritage Foundation and the U.S. Senate Committee on Environment and Public Works.

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