Lawmakers: Gov. Stitt’s Managed Care Plan Complicates Medicaid Expansion Funding Plan
More than half a year after voters approved a state question that will require Oklahoma to offer health coverage to more than 200,000 low-income adults, state officials are still unsure how they’ll pay it.
The passage of State Question 802 last June started a countdown for the state to start enrolling newly eligible Oklahomans in the state’s Medicaid program, known as Soonercare, by July 1.
But, with Oklahoma’s legislative session underway, there still isn’t an agreement on how the state will fund it.
And Gov. Kevin Stitt’s recent push to privatize SoonerCare now threatens to sink a previously agreed-upon deal that would use cost offsets and an increase in a fee hospitals pay to cover the state’s expected $162 million share of the costs.
As a result, lawmakers and the governor will need to simultaneously weigh whether to revamp the state’s Medicaid program and decide how to fund the new expansion group before the session ends in May.
And as things often are at the State Capitol, the debate between the two will be at least somewhat intertwined with battling lobbying groups and ideologies pulling lawmakers in different directions.
“A million things can happen,” said Rep. Marcus McEntire, R-Duncan, who chairs the House Appropriations and Budget Subcommittee on Health. “Really right now, things are just up in the air.”
How We Got Here
On first glance, funding the voter-approved Medicaid expansion didn’t seem as complicated as some previously feared.
When Stitt unveiled his proposed budget early this month, he returned to a familiar idea to pay for the bulk of the state’s share of the expansion’s cost: upping the Supplemental Hospital Offset Payment Program.
The Supplemental Hospital Offset Payment Program, started in 2012 with the support of the Oklahoma Hospital Association, is a provider fee paid by 65 hospitals in the state. Money from the fees are used to leverage federal Medicaid matching funds and help shore up the state’s Medicaid program.
Stitt similarly proposed increasing the fee (which would generate $118 million a year) last year when he tried to advance his own Medicaid expansion plan, called SoonerCare 2.0, before the SQ802 vote.
Unlike the expansion plan approved by voters, his plan would have sought a federal waiver to move to a block-grant model, add work requirements and require many enrollees to pay some premiums.
At the time, hospital leaders signaled they were OK with the added fee since the benefits from expanding Medicaid far outweighed the cost of a 2.5% to 4% fee increase. With the blessing of the hospital industry, the Legislature sent Stitt a bill doing exactly what he wanted.
But Stitt ended up vetoing that bill when he decided to nix his own plan that would’ve made Medicaid expansion take effect last summer. Among his reasons for the reverals: concerns over increased costs because more Oklahomans would be eligible for the subsidized health coverage amid the COVID-19 pandemic.
Though voters approved a constitutional mandate that the state fund the expansion by July 1, Stitt’s return to his original proposal to increase the Supplemental Hospital Offset Payment Program fee created a new road block.
Managed Care Debate Complicates Medicaid Funding Plan
Before the legislative session began, Stitt and state health leaders announced contracts that will shift Soonercare from a fee-for-service model to a managed care model that pays for-profit companies a set monthly fee, based on the number of Medicaid enrollees, to provide the care.
The governor argues that this will keep costs down while improving health outcomes.
But Oklahoma’s medical and hospital community has come out strongly against it, saying it will lead to higher administrative costs and discourage providers from accepting Medicaid patients for fear of reduced reimbursements and delayed payments.
Oklahoma Hospital Association Patti Davis said now the group has concerns that increasing the supplemental hospital fee while moving ahead with managed care will leave hospitals — particularly rural hospitals — vulnerable.
“We thought we had an agreement last year with the governor,” she said. “And our agreement was we would work with the (Oklahoma Health Care Authority) on value-based programs and budget-stability programs instead of going to commercial managed care. So the environment has changed significantly for us since last spring.”
Without the backing from the hospital community, it is unclear if there will be legislative support to use the supplemental hospital fee to pay for the majority of expansion costs if managed care remains a part of the picture.
Rep. Justin Humphrey, R-Lane, who penned a letter co-signed by 10 other Republican House lawmakers to Stitt in December opposing the move to managed care, said he now sees the Medicaid funding decision directly linked to whether the move to managed care can be reversed.
In the coming weeks, Humphrey said he and many other lawmakers, especially those with endangered rural hospitals in their area, will lean heavily on local medical leaders.
“I’m not a medical expert so what I do is I go talk to my medical experts,” he said. “So we’re going to get on a group text and the minute I hear something, I’m going to group text them and say, ‘how are we going to vote?’”
Democratic lawmakers too have reservations about managed care and increasing the supplemental hospital fee if the managed care plan proceeds.
Rep. Forrest Bennett, D-Oklahoma City, said he and other members of his caucus want to have more discussions with all stakeholders, including hospital administrators, before they make a decision.
But, sharing frustrations with Republican lawmakers who have criticized Stitt for shutting lawmakers out of the process, Bennett added that these discussions should have been happening since State Question 802 passed.
“I feel these conversations should have happened in a more public way between lawmakers and the governor,” he said.
The debate over the future of the state’s Medicaid program already has sparked political tensions early this session.
Senate Floor Leader Kim David, R-Porter, who supports the managed care move, was censured and briefly sidelined from her leadership duties by Senate Pro Tem Greg Treat, R-Oklahoma City, after she her press conference comment that lawmakers opposing managed care “don’t exactly understand what the concept is.” The official reprimand was first reported by NonDoc.
What Could Happen Next?
Lawmakers will need to again approve a bill if they want to increase the supplemental hospital fee. But if that doesn’t happen, the Legislature and governor will need to find a new way to pay for the Medicaid expansion.
According to the governor’s office, Stitt’s proposed budget already accounts for $70 million in cost offset, or savings, because of the expansion. This includes nearly $30 million in mental health savings that, without the expansion, would need to be fully paid by the state.
Stitt and other opponents of State Question 802 issued warnings during the lead up to the vote that its approval would trigger “higher taxes and cuts to core services.” But a spokeswoman for the governor said those options are not on the table.
“At the end of the day, a majority of Oklahomans voted to expand Medicaid,” said Carly Atchison, director of strategic communications at the governor’s office. “Despite potential funding challenges, Gov. Stitt is committed to ensuring Oklahomans do not pay more in taxes and that there are no cuts to core services. This is a part of his legislative agenda to deliver taxpayers more for their money.”
Lawmakers said they weren’t ready to discuss specific alternatives if the supplemental hospital fee isn’t approved. But one option is using savings or extra revenue after the Board of Equalization reported this week that lawmakers will have the ability to spend $1.2 billion more than what officials believed would be available when Stitt built his budget proposal.
The future of the managed care debate also is far from settled.
Oklahoma State Medical Association, Oklahoma Dental Association, Oklahoma Osteopathic Association, Oklahoma Society of Anesthesiologists and the Oklahoma chapter of American Academy of Pediatrics filed a lawsuit earlier this month seeking an injunction to stop Stitt’s plan.
The health groups argue that neither Stitt nor the Oklahoma Health Care Authority have the power to unilaterally contract with the managed care firms without first gaining approval from the Legislature.
While that lawsuit plays out, lawmakers also have their own options.
McEntire said legislators could simply pass a bill that says managed care is not allowed for SoonerCare or seek legislative changes to define what managed care entails.
The Legislature could also seek to block funding for managed care in the budget that is typically approved near the end of the session.
In both cases, lawmakers likely will need to secure two-thirds majorities in both chambers to prevent Stitt from vetoing the bills.
“How confident am I right now that we can derail (managed care)? I would say I’m at 50-50,” McEntire said.