Oklahoma health care leaders estimate state hospitals will see $6.3 billion in Medicaid reimbursement cuts as funding reductions made to the program through President Donald Trump’s “One Big Beautiful Bill” set in.
Last week, U.S. House Republicans passed Trump’s massive spending and tax bill with a vote of 218 to 214. Only two Republicans voted against it alongside Democrats. Every member of Oklahoma’s congressional delegation voted in favor of the measure, which was signed into law July 4.
Nearly one in four Oklahomans are on Medicaid, or SoonerCare. A state-level analysis by independent health policy group KFF found that as many as 171,000 Oklahomans could lose coverage based on the bill’s provisions.
The package limits provider taxes and state-directed payments, imposes work requirements on adults ages 19 to 64, with certain exemptions, and increases eligibility redeterminations to at least every six months for adults covered under Medicaid expansion.
Two Mercy hospital administrators spoke with StateImpact about what these cuts could mean for Oklahoma hospitals and patients. One called them "draconian" and the largest he’s seen in decades.
What does the megabill say about hospitals?
The megabill prohibits states from establishing any new provider taxes or increasing the rates of existing taxes. In Oklahoma, that impacts the Supplemental Hospital Offset Payment Program (SHOPP), which draws down additional federal funding to shore up underpayments in Medicaid.
The program taxes hospitals and uses collected fees to accomplish that. The total is redistributed to participating hospitals. That fee is currently at 4% of each hospital's net revenue.
All states except Alaska use provider taxes to help finance the state’s share of Medicaid spending, and the current federal maximum is 6%. This limit will now be phased down by .5% annually starting in FY 2028 until it reaches 3.5%. This means Oklahoma’s rate will remain at 4% until FY 2032.
State-directed payments allow Oklahoma to increase reimbursement rates to hospitals so they are not being paid below cost. Amid a transition to managed Medicaid, where the Oklahoma Health Care Authority (OHCA) went from paying providers directly to paying private companies to coordinate some enrollees’ care, hospitals benefited from increased reimbursements.
Before managed care, OHCA could only draw down the difference between Medicaid and Medicare rates, totaling supplemental payments of about $800 million annually. As the state moved to managed care, it approved a methodology tied to quality improvement, allowing it to draw down closer to what commercial insurers would pay, which is the difference between Medicaid and 90% of the average commercial rate.
OHCA distributed $252.4 million in enhanced directed payments to hospitals in April 2024, which was made possible through the transition to managed Medicaid and a 2023 state appropriation, according to its state fiscal year 2024 annual report. Its new SHOPP program based on average commercial reimbursement levels also adds $500 million annually to state hospital funding and “incentivizes providers to improve access and outcomes.”
Trump’s megabill will begin phasing down these payments by 10% every year starting in January 2028 until they reach 100% of the Medicare rate. President of Mercy Southern Oklahoma Communities Daryle Voss said this will mean billions in cuts to Oklahoma hospitals over time.
“To me, it's pretty clear that our legislators want to pay hospitals less for Medicaid and Medicare services – they want to pay us something less than our cost,” Voss said. “Those kinds of cuts are draconian.”
Bobby Stitt is an administrator for three Mercy critical-access hospitals in Watonga, Kingfisher and Logan County. The critical access designation reduces hospitals' financial vulnerability through enhanced reimbursements.
Oklahoma’s rural hospitals will see the largest impacts through these cuts, with 67% of them already operating with losses on patient services.
Stitt said he came to Watonga in 2012 when the town’s hospital was struggling as an independent municipal facility. He said it takes a lot of effort to make finances work. Now, Watonga has access to more services, including physical, occupational, speech and pediatric therapy.
“We've had the opportunity to grow in these areas and stabilize ourselves and continue to offer that service to our communities,” Stitt said. “But again, this is just one more threat to that growth and that opportunity that we see ahead for our community. And we don't want to lose that.”
Stitt also cited how obstetrical services have dwindled over the years.
From 2010 to 2022, more than a quarter of hospitals with obstetrics closed these services in Oklahoma. As of 2022, approximately 63% of Oklahoma's hospitals lacked obstetrics.
Medicaid covers more than half of Oklahoma’s deliveries.
Voss oversees five hospitals in Oklahoma, including two in Ada and Ardmore that offer obstetrical services. He said Mercy will do everything it can to keep services online through federal cuts, but he has concerns about programs that are “heavily laden” with Medicaid patients.
“When you're looking at a program where you are getting paid less than cost, you can't make that up in volume. And so it does put vulnerability where I think hospitals really have to start looking at the programs that are predominantly Medicaid patients and saying, ‘Hey, can we afford to provide this service when we know we're seeing patients at below our cost?’” Voss said.
New work requirements
The megabill also includes work requirements of 80 hours per month for adults ages 19 to 64, with certain mandatory exemptions. Those include:
- Pregnant women
- Foster and former foster youth
- American Indians/Alaska Natives/Urban Indians
- Veterans with rated disabilities
- Individuals who are medically frail
- Individuals receiving treatment for a substance or alcohol use disorder
- Individuals who meet work requirements for the Temporary Assistance for Needy Families program or Supplemental Nutrition Assistance Program
- Parents or caregivers of a dependent child age 13 or younger or of an individual with a disability
- Incarcerated individuals
- Individuals entitled to postpartum coverage
The deadline for implementation is at the end of 2026.
A KFF analysis found that 92% of adults on Medicaid are working or would likely qualify for an exemption. Many enrollees who would remain eligible would be at risk of losing coverage because of administrative burdens and “red tape” related to reporting requirements, the analysis said.
Stitt said he’s concerned about people losing coverage. Uninsured adults are more likely to postpone or forgo health care due to potential costs. He said he worries more people will end up delaying care or in the emergency room where care is more costly.
“I had a conversation with [Rep. Frank] Lucas and shared that with him. He came to Watonga, and I just pretty directly said, ‘You know, sir, the fact of the matter remains is that these folks are going to need care, and we're going to provide it as long as we're here to do that. So there needs to be a solution in place,” Stitt said.
Four of the hospitals overseen by Stitt and Voss appear on a list of rural facilities considered at-risk under the megabill. Twenty-one of Oklahoma’s hospitals are included overall.
Stitt said hospitals are often the biggest employers in a community. A report from the Oklahoma Hospital Association found state hospitals had an estimated $30.5 billion economic impact in 2021, supporting 186,000 jobs directly and indirectly.
“When you suffer from that and see job loss, you typically see people beginning to make decisions to no longer live in those communities," Stitt said. “… You see communities dwindle and economics of those communities suffering more, and those folks are left without resources that do stay.”
The megabill establishes a Rural Health Transformation Program, which includes $50 billion over five years starting in FY 2026 for state grants. Those could be used for things like payments to rural health care providers.
An OHCA spokesperson said in an email to StateImpact the agency is evaluating all provisions related to the program and is awaiting further guidance from the Centers for Medicare and Medicaid Services.
According to KFF estimates, Medicaid spending in rural areas could decrease by $155 billion over 10 years. Stitt said the program “doesn't speak well to a plan.”
“Yes, you've segmented some dollars, and you said, ‘Hey, we want you to know we care about you.’ But we don't know how that's going to translate out, how we're going to actually receive those dollars,” Stitt said. “Would it be equal to what we currently receive from our SHOPP payments? Will it be less? Are those dollars going to go to the right places?”
Stitt said although he thinks the road ahead will be difficult, that Oklahoma has been through difficult times before. He said now is the time for stakeholders to work together on a plan for what health care will look like in Oklahoma.
“The fact of the matter is it's been passed, and so now we've got to get on with what's next. And what's next is we have to figure out how to make it work,” Stitt said. “I believe that our state, and even our country, is capable of that. But it's going to take some real pulling together of those who, number one, make laws and those who are impacted by the laws, to really come together and talk through these issues and say, ‘Well, let's figure out what we're going to do then if this is how this needs to be.’”
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