In 2020, by the narrowest of margins with absentee voters providing most of the support, Oklahomans voted to add able-bodied adults to the state’s Medicaid welfare program, as allowed by the federal Affordable Care Act (ACA), better known as “Obamacare.”

It was well-known in 2020 that Medicaid expansion would require the diversion of hundreds of millions of state tax dollars from other uses to support the program, but now state costs may be set to skyrocket, creating a budget shortfall comparable to some of the annual shortfalls experienced during the state’s last oil bust.

“We might have to absorb a lot of new costs,” said Senate President Pro Tem Lonnie Paxton, R-Tuttle.

Under current law, the federal government pays a 90 percent federal match rate (the “Federal Medical Assistance Percentages,” or FMAP) for able-bodied adults added through ACA expansion, meaning the federal government pays 90 percent of the cost.

In contrast, the federal government pays only 66.47 percent of costs for individuals enrolled in Oklahoma’s traditional Medicaid program, which serves medically needy, low-income individuals.

Since the federal Affordable Care Act became law, officials from both parties have sought to reduce the 90-percent match, which has been criticized for incentivizing states to prioritize able-bodied adults over the medically needy.

For example, in 2012 the Obama administration proposed creating a “blended rate” that would have lowered the federal match for expansion enrollees and shifted greater costs to state governments.

Expansion opponents have long warned the 90-percent match is unlikely to endure and state governments could easily face significantly higher costs for Medicaid expansion.

Now, with federal officials focused on getting government spending under control, the likelihood of a change in the match rate for states’ Medicaid expansion enrollees appears especially likely. A recent budget bill passed by the U.S. House of Representatives included language indicating a shift in Medicaid payments may be coming.

Paxton discussed the repercussions of Medicaid expansion during a recent press availability.

“It’s on a 90-10 basis—so 90 percent the feds pay, 10 percent the state pays,” Paxton said. “They’re talking about that going all the way to 60-40. If that is a fact, that’s about a $550 (million) to $700 million hit on the state’s budget.”

Paxton said the change could occur all at once, or be phased in over several years.

The Senate leader is not surprised federal lawmakers are revisiting Medicaid-expansion spending given the nation’s fiscal problems.

“They’re dealing with a government that’s spending $2 trillion more than what they’re bringing in,” Paxton said. “They have to get that under control, and Medicaid is a big pot of money they’re looking at.”

A recent analysis by KFF, formerly known as the Kaiser Family Foundation, estimates that if states maintain Medicaid-expansion coverage after a reduction in the federal match, they will have to increase state spending on the program by 17 percent overall (for a combined $626 billion in increased state costs nationwide).

Oklahoma is one of 41 states that have expanded Medicaid. Nine states have chosen not to expand their Medicaid programs to include able-bodied adults, meaning those nine states will not be negatively impacted by any change in federal policy.

Medicaid expansion threatens to blow up the budget while providing no promised benefits

Even as Medicaid expansion threatens to unleash budgetary chaos in Oklahoma, it has failed to provide either of the benefits promised by advocates. Expansion has not made Oklahoma hospitals more financially sound, nor have health outcomes improved.

Recent reports have shown more rural hospitals face closure today than before Medicaid expansion.

Research conducted by the Chartis Center for Rural Health and released in 2024 found the percentage of America’s rural hospitals operating in the red jumped from 43 percent to 50 percent in the prior 12 months.

The report said Oklahoma had 22 rural hospitals vulnerable to closure.

The Chartis Center estimated a larger percentage of Oklahoma rural hospitals were vulnerable to closure than their counterparts in several non-Medicaid-expansion states such as Texas, Wyoming, Wisconsin, Mississippi, and Georgia.

The Chartis Center report also showed a larger share of Oklahoma rural hospitals operated in the red than hospitals in non-expansion states such as Texas, Wisconsin, Florida, Georgia, and South Carolina.

Similarly, a report released in 2023 by the Center for Healthcare Quality and Payment Reform (CHQPR) found that about half of Oklahoma’s rural hospitals were at risk of closing, with nearly one in three rural hospitals at risk of “immediate” closure.

The Center for Healthcare Quality and Payment Reform also reported that 58 of Oklahoma’s 78 rural hospitals, or 74 percent, were reporting financial losses on services.

Those numbers were significantly worse than the financial status of Oklahoma rural hospitals before Medicaid expansion.

In July 2019, GateHouse Media reported that just 52 percent of rural hospitals in Oklahoma lost money from 2011 through 2017.

The lack of financial stability is due, in part, to the fact that hospital officials say they lose money on Medicaid patients. The more people on Medicaid, the more money hospitals lose. In addition, as health care providers treat more Medicaid patients, they charge higher prices to other patients to make up for Medicaid losses.

A 2024 study from the Foundation for Government Accountability reviewed the federal filings of more than 4,000 hospitals nationwide. In 2013, the final year before Medicaid expansion was implemented, the report showed that hospitals in states that embraced expansion reported just over $10 billion in losses due to Medicaid. But by 2021 those Medicaid losses had ballooned to $22.3 billion, an increase of 115 percent.

In contrast, hospitals in non-expansion states saw their Medicaid shortfalls increase by only 6 percent.

In expansion states, hospitals’ average profit margin fell from 6.2 percent in 2013 to just 1.4 percent in 2021. But in non-expansion states, hospital profit margins increased from 4.9 percent in 2013 to 7 percent in 2021.

Similarly, Medicaid expansion has produced no notable improvement in health outcomes in Oklahoma.

In 2019, data from the America’s Health Ranking report showed Oklahoma ranked 47th out of the 50 states in health outcomes.

The latest edition of the report, which contains data from 2024, shows Oklahoma still ranks 47th.

Several states that have not expanded their Medicaid programs continue to have significantly better health outcomes than Oklahoma. Wisconsin ranked 20th for health outcomes, Kansas ranked 28th, Florida ranked 31st, Wyoming ranked 32nd, South Carolina ranked 37th, Georgia ranked 38th, and Texas ranked 40th.

Going back to the voters?

Paxton noted that expansion was added to the Oklahoma Constitution when voters approved it, meaning lawmakers cannot make even minor tweaks to the program, such as adding simple things like work requirements for able-bodied adults.

Any changes, or even repeal of Medicaid expansion, would require another vote of the people, a process that takes time.

“Other states have the ability to go in there and manage their Medicaid expansion, because they are statutory provisions,” Paxton said. “Ours is a constitutional provision. That makes it difficult.”

Paxton noted the state’s FMAP savings account currently has about $600 million, which will buy lawmakers some time, but long-term decisions about Medicaid expansion may have to be tackled.

That could include giving voters a second bite at the apple now that the program’s costs are potentially poised to explode.

“We may have to absorb it,” Paxton said, “or we may have to go back to the voters.”