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Ray Carter | March 12, 2020

Medicaid expansion may consume tobacco funds

Ray Carter

Gov. Kevin Stitt’s decision to unilaterally expand Oklahoma’s Medicaid program to include able-bodied adults has left lawmakers scrambling to fund the program. A measure that would redirect Oklahoma’s tobacco-settlement funds to Medicaid is one proposal that has now gained approval in the Oklahoma Senate.

“The purpose of me doing this, members, is to help pay for the expansion population that will be coming into the Medicaid system,” said Sen. Kim David, R-Porter.

Senate Joint Resolution 27, by David, would allow Oklahoma voters to amend the state constitution so that 75 percent of annual payments made by tobacco companies as part of a national settlement will be deposited into a special fund where the cash “shall be appropriated and expended to draw down federal matching funds for the Medicaid program.”

The remaining 25 percent of settlement funds would be deposited into the “Tobacco Settlement Endowment Trust Fund,” which currently pays for a range of health-related projects and programs. Currently, TSET receives 75 percent of tobacco-settlement payments. TSET uses interest earnings generated off the cumulative tobacco payments made over the past two decades to pay for health-related programs, a practice that would continue even if SJR 27 becomes law.

David said the legislation would redirect about $30 million in tobacco funding to Medicaid. She noted many programs funded by TSET today serve the population of able-bodied adults who will be added to Medicaid.

“The population that we’re looking at bringing into the expansion population, as you all well know from the studies that have been going on for years, the largest majority of their health concerns are related to smoking,” David said. “That is exactly what the settlement money was set up for.”

But several lawmakers objected, including those who have long supported Medicaid expansion.

Sen. Kay Floyd, D-Oklahoma City, noted TSET was created by voters and said its funding should not be altered.

“It has worked better than I think anybody ever anticipated that it would,” Floyd said. “I understand that we are looking for funding. We’re trying to find matching funds for the Medicaid program. TSET’s not the place to get it. We should leave this program alone.”

Floyd said the state could instead tap state savings, which now total $1 billion, to cover initial Medicaid expansion costs.

Sen. Carri Hicks, D-Oklahoma City, noted a recent study links type 2 diabetes to smoking, and said TSET funding will be “increasingly important to counteract those effects.”

“I don’t understand how we can divert money out of this fund when we know that need is only going to continue to grow,” Hicks said.

“The diabetes for smokers, this is the population that we’re talking about that will now be covered by Medicaid,” David said.

David also noted the costs of Medicaid expansion will likely be far greater than expected, making the use of one-time savings a risky strategy.

“There has not been one single state in this nation that has expanded Medicaid where the costs have not tripled or quadrupled what they expected the costs to be,” David said. “So keep that in mind.”

While the governor has indicated he expects just 180,000 people to sign up for Medicaid expansion at a state cost of $150 million in new state funding, a prior state report found Oklahoma’s expansion population could include up to 628,000 able-bodied adults. Based on current Medicaid expenses, that translates into a state cost of up to $374 million annually.

SJR 27 passed the Senate on a 36-11 vote.

Ray Carter Director, Center for Independent Journalism

Ray Carter

Director, Center for Independent Journalism

Ray Carter is the director of OCPA’s Center for Independent Journalism. He has two decades of experience in journalism and communications. He previously served as senior Capitol reporter for The Journal Record, media director for the Oklahoma House of Representatives, and chief editorial writer at The Oklahoman. As a reporter for The Journal Record, Carter received 12 Carl Rogan Awards in four years—including awards for investigative reporting, general news reporting, feature writing, spot news reporting, business reporting, and sports reporting. While at The Oklahoman, he was the recipient of several awards, including first place in the editorial writing category of the Associated Press/Oklahoma News Executives Carl Rogan Memorial News Excellence Competition for an editorial on the history of racism in the Oklahoma legislature.

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