Oklahoma Gov. Kevin Stitt (R) cancelled his state’s planned Medicaid expansion, citing a lack of funding that can be traced back to the impact of COVID-19 on the American economy.
Before the pandemic struck, Oklahoma was on track to becoming the first state in the nation to finance Medicaid expansion for low-income people via Trump administration-approved federal block grants. It is not clear how the governor’s decision to forego Medicaid expansion, at least for the time being, will affect the planned move to block-grant financing on July 1, 2021.
Block Grant to Manage Expansion
Stitt’s Medicaid expansion plan, known as SoonerCare 2.0, would apply capped funding to an estimated 220,000 low-income adults with income less than 133 percent of the federal poverty level, allowing them to become newly eligible for Medicaid.
The governor’s plan would move people away from a “fee-for-service” model by adopting block grant funding and requiring able-bodied Medicaid enrollees to work, attend school, or attend a certification program in order to stay in the program.
Oklahoma is one of 14 states that have not expanded Medicaid coverage under the Affordable Care Act, also known as Obamacare. Other states that have expressed an interest in funding Medicaid through block grants include Alaska, Georgia, and Tennessee.
One of the nation’s leading producers of oil and natural gas, Oklahoma has been hard hit by the recent collapse in oil and gas prices and global demand for fossil fuels. The sudden economic downturn and Stitt’s subsequent decision to put a hold on Medicaid expansion come at a time when voters will be deciding the fate of State Question 802, a June 30 ballot initiative that would expand Medicaid without block grants or work requirements for recipients.
Constitutionally Protected Costs
State Question 802 would cover about 200,000 people under the age of 65—about 5 percent of the state’s population. Estimates on the potential cost of the ballot initiative-driven Medicaid expansion range from $175 million to $375 million per year.
However, costs are hard to predict because the initiative would enshrine expansion in the state’s constitution, says Samantha Fillmore, government relations coordinator for The Heartland Institute which publishes Health Care News.
“It would leave elected officials in Oklahoma to have to find a substantial source of funding for this large and permanent expansion,” Fillmore said. “With states’ revenues across the nation suffering a serious blow from stay-at-home order, this is the worst time to commit to that level of expansion and spending. Voters should decide if they are prepared to permanently alter their Constitution and commit to exponential spending for generations. Furthermore, massive state expansions, at their very core, do not help and protect its most vulnerable citizens.”
Getting Hospitals to Help Pay
Taking account of the new situation, the governor vetoed a bill on May 21 that would have increased hospital fees to help pay for SoonerCare 2.0, stating it didn’t include enough long-term funding for his planned expansion of Medicaid.
Senate Bill 1046 would have generated $134 million annually—a significant portion of Oklahoma’s share of financing Medicaid expansion, expected to be about $164 million in the coming fiscal year—and would have applied regardless of which plan the state would ultimately implement.
Faced with a deteriorating financial situation, Stitt felt he had little choice but to veto the bill.
“Due to the current COVID-19 pandemic and uncertainties within the energy markets and commodity prices, unemployment rates are expected to be as high as 14 percent,” Stitt said in a statement explaining his veto. “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.”
Vetoing SB 1046 was the right decision, says Victoria Eardley, senior research fellow at the Foundation for Government Accountability.
“Expansion has failed everywhere it has been tried,” Eardley said. “There is no reason to think that Oklahoma’s experience would be any different, no matter how it’s achieved. Governor Stitt made the right decision but in the coming months, Oklahoma should think twice before welcoming out-of-control expansion spending and enrollment, especially in the midst of our current crisis.”
State officials expected to receive approval for their block-grant initiative from the Centers for Medicare & Medicaid Services (CMS) by November. The state’s health department said it would continue to work with CMS to evaluate health care options for Oklahomans.
Bonner R. Cohen, Ph.D., (firstname.lastname@example.org) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow (CFACT).