Health Care

Oklahoma’s Medicaid costs surging

January 25, 2022

Ray Carter

Due to passage of State Question 802, Oklahoma’s Medicaid program was expanded starting last July to include many able-bodied adults. The expansion, which was authorized by the federal Affordable Care Act (better known as “Obamacare”), was touted as a way to expand health services with little real cost to state governments because a high rate of federal matching funds was provided.

But during an Oklahoma Health Care Authority (OHCA) budget presentation to state lawmakers this week, OHCA officials listed “sustainable funding for expansion population” as one of the major challenges facing the agency.

“We still have to work on a sustainable funding mechanism for expansion,” Kevin Corbett, CEO of the Oklahoma Health Care Authority, told members of the House Appropriations and Budget Committee.

Last year, lawmakers had to provide an additional $164 million in state appropriations just for the Medicaid expansion population. That money came mostly from an increase in the Supplemental Hospital Offset Payment Program (SHOPP) fee assessed on some hospitals’ revenue.

However, hospital officials have since announced they no longer want to pay the SHOPP fee, even though hospital officials previously endorsed both the creation of SHOPP and the expansion of Medicaid. Hospital officials instead urged lawmakers to divert other tax collections away from other uses.

In the first six months, officials have added roughly 200,000 individuals to Medicaid as a result of expansion, although Corbett said only 160,000 represent true new enrollees since the remainder previously had coverage through other government programs.

The added costs created by expansion come amidst a dramatic surge in the overall cost of Oklahoma’s Medicaid program.

“You can see we’ve had a growth with regards to this program,” Corbett said. “If you look at just where we were in 2017 and where we are for fiscal ’22, it rises from a $5.5 billion budget, or organization, to an $8 billion budget, almost 46-, 47-percent increase, largely due to enrollment increases as well as cost or utilization of services.”

Most of the increased cost has been borne by the federal government because of increased federal-matching rates in recent years, he said, but that is changing this year as the matching-rate for the traditional Medicaid program is being cut by the federal government.

“That is not fixed financing with regards to our federal partners,” Corbett said. “It changes every year.”

To offset the reduction in federal matching funds will require an additional $24.4 million in state appropriations in the next state-budget year, according to OHCA officials.

In addition, officials anticipate the cost of serving those enrolled in the traditional Medicaid program will increase 2.6 percent in the next year while the cost of serving those enrolled in Medicaid through the Obamacare expansion will surge 6 percent next year. As a result, OHCA officials are requesting another $52.3 million for maintenance of the existing program, along with the $24.4 million to offset declining federal payments.

Those increased state expenses may be only a glimpse of more to come.

OHCA’s budget presentation showed that the per-person cost of Medicaid enrollees has been on a steady upward swing, increasing from $4,831 per person per year in the 2020 budget year to $5,385 per person in the coming state budget year, an increase of more than 11 percent in just three years.

And, while Medicaid expansion was touted by supporters as a way to save rural hospitals, OHCA budget materials show the vast majority of expansion funds are likely going to urban facilities. OHCA figures show 61 percent of expansion enrollees live in urban areas.