In 2020, Oklahoma voters were told the state could receive billions in “free” federal money by adding able-bodied, working-age adults to the Medicaid welfare program.

In reality, Medicaid expansion has been a key cause of rapidly increasing health care costs in Oklahoma since 2020, according to an expert who testified at a legislative hearing conducted by members of the Oklahoma House Appropriations and Budget Committee.

“Government intervention in health care is what is disadvantaging patients in the health care market right now,” said Niklas Kleinworth, director of the State Health Reform Initiative at the Paragon Health Institute. “The core problem with health care right now is that the people who are receiving the services are not the people negotiating the prices.”

He noted that government regulations often reduce supply in the health care market. Combined with the perverse incentives created by government policies, that’s been a formula for health care costs that increase at a rate far above citizens’ wage growth.

“Inflation of health-care services far exceeds most other spending categories,” Kleinworth said.

From January 2000 to December 2025, the cost of hospital services increased by 281 percent nationwide, and the price of medical care services increased by 147 percent. In contrast, the cost of a new car increased just 25 percent during that time, while the cost of cell phone service declined by 44 percent.

The cost of Oklahoma’s Medicaid program, which covers the cost of treatment for certain welfare populations, was stable from 2013 to 2020, increasing by just 12 percent while spending increased 61 percent in other states.

But Oklahoma’s Medicaid spending has exploded since able-bodied, working-age adults were added to the program after a 2020 ballot measure passed. By 2025, Oklahoma’s Medicaid expenses were 135 percent greater than in 2000, only slightly lower than the national increase of 143 percent.

“Medicaid expansion in particular disrupted what was a once-stable Oklahoma budget,” Kleinworth said.

Adding able-bodied people to Medicaid has resulted in excessive spending that does not provide better care but does generate cost-shifting that inflates the price of private insurance in Oklahoma.

“This is largely because a lot of the (Medicaid) patients—because there is no (personal) cost for their care—they are not able to make that economic calculation for how to direct their care,” Kleinworth said. “They’re going to go to the emergency room more often than going to what would ultimately be a better course of care, which would be through an urgent care or something less acute.”

He noted that Medicaid waste, fraud and abuse also create shortages in the health care system. Those shortages are caused by ineligible individuals receiving benefits who then “crowd out” other patients seeking medical treatment, as well as fraudulent providers who drive up costs.

Medicaid “provider taxes” also inflate healthcare costs, Kleinworth noted. Those taxes, which on paper are levied on health care providers to generate state funds that are then used to obtain additional federal Medicaid matching dollars, are ultimately paid by patients.

“Provider taxes are often passed on to the patient—about 80 percent of the (tax) cost,” Kleinworth said. “And this raises hospital expenditures by about 3 to 4 percent for the private payers.”

The use of provider taxes to increase federal matching funds is also fueling ever-higher federal deficit spending, which is a key cause of overall inflation, Kleinworth said. In 2022, he noted researchers concluded 42 percent of inflation was caused by federal spending.

“So as the state shifts state spending onto the federal government, this increases the rate of overall inflation as the federal government has to send more money out the door for these programs,” Kleinworth said.

Medicaid payments to hospitals are also tied to commercial rates, which creates a perverse incentive.

“The problem with doing that is it naturally encourages the hospitals to increase their commercial rates in order to garner more Medicaid funding,” Kleinworth said.

As a result, Medicaid expansion has created additional costs for working families across Oklahoma.

“Sooners are hit twice with the prices,” Kleinworth said. “First, they are hit with the increasing prices for their own personal spending on their health care, but it also means that they are hit with the increased cost of their taxes to be able to finance things like the Medicaid program.”

In addition to driving up health care costs in Oklahoma, Medicaid expansion has failed to live up to numerous promises made by expansion proponents in 2020. The death rate in Oklahoma was higher in 2025, five years after expansion was approved, than it was in 2015, five years prior to the expansion vote. And health outcomes in most states that did not expand Medicaid are better than health outcomes in Oklahoma following Medicaid expansion.

Kleinworth also highlighted other government policies that are causing strong inflation in health-care prices.

Most major mandates in the federal Affordable Care Act (better known as “Obamacare”) took effect in 2014, and those mandates have fueled higher costs for Oklahomans who have private insurance through an employer.

“A lot of things like the coverage mandates and other mandates that drive prices didn’t kick in until 2014, and that is when you see that insurance prices started to diverge in their annual growth from the rate of inflation,” Kleinworth said. “And it’s continued to increase since then.”

In Oklahoma, the price of a large-group market premium has increased faster than the rate of inflation since the Affordable Care Act mandates took effect, he noted. Since 2013, general inflation has increased prices by 39 percent, but the cost of a large-group market premium in Oklahoma has surged 59 percent.

One advantage Oklahoma has is that state policymakers have substantially avoided many regulations that artificially limit the supply of health care providers and drive up consumer costs in other states, such as Certificate-of-Need (CON) Laws and scope of practice restrictions, Kleinworth said.

However, Oklahoma does have CON laws restricting the supply of skilled nursing facilities and certain mental institutions.

“Repealing something like the skilled-nursing CON law could help reduce costs for your most expensive Medicaid patients,” Kleinworth said.

He noted Oklahoma also has scope of practice restrictions for pharmacists that cause price inflation for consumers. Allowing pharmacists to perform various simple tasks could reduce medical costs, he said.

At the federal level, Kleinworth noted that the Trump administration has taken steps to address healthcare inflation, including by allowing traditional short-term insurance plans that are exempt from many mandates. Under the Trump administration, those more affordable insurance policies provide a year of coverage and can be renewed for multiple years.

Thanks to the “One Big Beautiful Bill Act” passed in 2025, the federal government now permits health savings account (HSA) spending on direct primary care and has expanded HSA-eligible and non-network health plans.

Kleinworth encouraged Oklahoma lawmakers to take advantage of those federal policy changes by codifying them in state law while also repealing state “certificate of need” and “scope of practice” laws.

“Oklahoma is off to a great start,” Kleinworth said, “but has a lot of great opportunities to do more to make health care more affordable.”