The Oklahoma Legislative Office of Fiscal Transparency (LOFT) met Wednesday to review funding sources for the Oklahoma Health Care Authority (OHCA), and it found the state’s spending on Medicaid was one of the nation’s lowest amid enhanced federal funds during the COVID-19 pandemic and incentives it received from expanding Medicaid.
The 67-page report notes OHCA is funded by state revenues and federal money. In the 2023 state fiscal year, it received $1.1 billion in state appropriations and $7.5 billion in federal funding. The remaining $1.8 billion came from prescription drug rebates, provider fees and other sources.
The percentage of state Medicaid costs covered by the federal government, or the Federal Medical Assistance Percentage (FMAP), is based on a state’s average per capita income, ranging from 50% to 83%. Oklahoma’s expected FMAP for the 2025 federal fiscal year is 67.08%.
In 2021, the federal government shouldered the majority of Oklahoma’s Medicaid expenses. Oklahoma was among the states paying the lowest share of Medicaid costs. This was because the state’s FMAP has been enhanced in the past few years.
Starting in March 2020, states couldn't remove people from Medicaid even if they became ineligible. They could only do so if someone moved, died or asked. In exchange, states received enhanced federal funding. This increased the state’s federal matching by 6.2% through March 2023.
In 2020, Oklahoma voters approved State Question 802, which expanded Medicaid eligibility to adults aged 19 to 64 whose income is 138% of the federal poverty level or lower. Oklahoma received an additional 5% federal match through the American Rescue Plan Act as a Medicaid expansion state from July 2021 to the end of the 2023 state fiscal year.
With an increase in revenue came more expenses. The 2023 state fiscal year’s were $9.93 billion compared to a 2013 through 2019 state fiscal average of $5.46 billion. Some costs came from state and federally mandated Medicaid funding rate increases for things like nursing homes and the Oklahoma Medical Board.
Nearly half of the new spending came from Oklahoma’s Medicaid expansion population.
The report notes the $2.1 billion cost is likely inflated because it includes Oklahomans who were on Medicaid during the pandemic’s continuous enrollment period and have since become ineligible. As of Nov. 30, that included over 307,000 Oklahomans.
In April 2024, the expansion population was 247,293 Oklahomans.
The cost of Medicaid expansion
OHCA is now responsible for the entirety of the state’s share of Medicaid expansion, according to the LOFT report. The overall cost for the Medicaid expansion population is nearly $2.5 billion for the 2025 state fiscal year, and the agency estimates the state will be responsible for $213 million.
The Supplemental Hospital Offset Payment Program (SHOPP) was meant to help offset the costs of Medicaid expansion. The program taxes hospitals and uses collected fees to attract more federal money. That total is redistributed to participating hospitals.
An increase in the SHOPP fee assessment rate from 2.5% to 4% in 2024 through Senate Bill 1045 caused revenue to increase. OHCA projects it will bring in $378.5 million through SHOPP revenues in the 2025 state fiscal year, leaving $168 million to fund the state’s portion of Medicaid expansion. This is about $45 million short.
OHCA said it will use various state revenue sources to fill the gap, but it anticipates Medicaid expansion and prescription drug spending will increase over time and eventually not be enough to cover future deficits. OHCA will need the state to allocate additional revenue if that becomes the case.
Oversight of Oklahoma’s Medicaid program
The report also stressed the importance of maintaining proper oversight over the state Medicaid program.
In 2022, the Centers for Medicare and Medicaid Services’ (CMS) Payment Error Rate Measurement auditors reviewed 540 sample claims, which consisted of 417 Medicaid fee-for-service claims and 123 cases of Medicaid eligibility. These audits occur every three years.
Medicaid fee-for-service refers to when OHCA paid providers directly. Now, under Medicaid managed care, it’s paying private companies to coordinate some enrollees’ care, including pregnant women, children and the Medicaid expansion population. Managed care, or SoonerSelect, went live April 1.
In the audit, CMS found no errors among fee-for-service claims and seven case errors for Medicaid member ineligibility, meaning it had an improper payment rate of 2.5%. That’s significantly lower than the national average of 15.6%.
The report found long-term care and nursing homes were responsible for most of the errors in the sample claims.
A 2020 special audit by State Auditor and Inspector Cindy Byrd assessed whether OHCA, from July 2018 through June 30, 2019, had sufficient controls to ensure only eligible Oklahomans are enrolled in Medicaid.
Oklahoma Human Services (OHS) also administers eligibility determinations for aged, blind and disabled Oklahomans. In the audit, Byrd found inaccuracies and missing documentation in case files, making it difficult to assess service eligibility for these populations.
It also found OHS didn’t run data exchanges frequently enough to ensure applicants’ information was checked with state and federal electronic records databases to verify accuracy. And, when there was a discrepancy, the issue was often not resolved in application processing time.
“When discrepancies are identified and not cleared timely, ineligible individuals may receive benefits,” according to the auditor.
The LOFT report notes OHCA has taken steps to correct its deficiencies that are highlighted in the report, and OHS is implementing a new case assignment system by September 2024 that will seek to alleviate errors and discrepancies.
“We've always found [OHS] to be proactive and responsive when we're discussing any sort of audit findings or anything about the process of how we can improve it,” said OHCA CEO Ellen Buettner during the LOFT meeting.
The report also states OHCA wants OHS case workers to receive more training to improve discrepancies and ensure accurate case documentation and proper maintenance of eligibility records.
As the state continues through the early stages of its transition into managed Medicaid, the report notes oversight will be critical.
“Due to the transition to managed care, it is critical to identify potential ineligible members to reduce overall expenditures,” the report reads. “Member Audits will continue to conduct investigations based on referrals, but the unit is also expanding opportunities to identify and investigate instances of potential fraud, waste, and abuse by members.”
Takeaways from the report
The committee presented policy notes and agency recommendations which Buettner said OHCA concurs with. Examples include asking the Legislature to require external audits of Oklahoma’s Medicaid rolls after the first full fiscal year of managed Medicaid and OHCA to enable access to more technological tools to enhance income eligibility verification.
Sen. Julia Kirt (D-Oklahoma City), a member of the LOFT committee, said in a press release her biggest takeaway from the report was the importance of Oklahoma voters' choice to expand Medicaid.
“It helped the state weather COVID, and provided health care access to more than half a million working people throughout the state,” Kirt said.
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