The Oklahoma Health Care Authority board approved a balanced budget Friday despite receiving only half of its requested funding increase during this year’s legislative session. Budget cuts and modifications are leaving the state Medicaid agency with “razor-thin margins” as it enters the 2027 fiscal year.
The agency initially asked for a nearly $500 million budgetary increase. Republicans called this figure “eye-opening” and used it as part of their argument against keeping Oklahoma’s voter-approved expansion of Medicaid eligibility in the state constitution.
Currently, the eligibility for adults making up to 138% of the poverty level cannot be adjusted without another vote of the people. Lawmakers proposed several state questions to move Medicaid expansion to statute, where they could make changes to address spending. None of them made it across the finish line.
Health Care Authority CEO Clay Bullard walked board members through the modifications made to ensure the agency could close the gap between the budget they originally presented to lawmakers and what they were given.
Several estimates changed in this new budget, including actuarial updates to the expected growth for Medicaid expansion and the traditional population, who are aged, blind or disabled. Initial estimates were far higher than the figures Bullard presented last week.
Estimated growth and utilization increases for Oklahomans on traditional Medicaid dropped from 10.1% to 4.8% and from 22.2% to 11.1% for people under Medicaid expansion. This decreased the funding gap by nearly $100 million.
Bullard said the agency also identified administrative savings through contract reviews and reductions, and by reducing its FTE count and eliminating its annual bonus program.
“Every person in the agency that works here felt a cut because of this process,” Bullard said.
Ultimately, the agency whittled down its deficit to $66 million. The agency shared this with the governor and his staff last week, Bullard said, which later convened with House and Senate leadership. On June 23, Bullard and Health Care Authority board members received a letter from House Speaker Kyle Hilbert, R-Bristow, and Senate Pro Tem Lonnie Paxton, R-Tuttle.
They wrote there is approximately $70 million in unencumbered carry-forward cash that could be used to help the agency’s board approve a balanced budget for the 2027 fiscal year.
It added the agency’s Rate Preservation Fund provides “sufficient liquidity for the agency should any cash-flow concerns arise.” The fund, which currently sits at about $325 million, is meant to help maintain provider rates if the federal government decreases its share of Medicaid expenditures.
The fund was amended last year to allow the agency to use up to one-third of it – or about $108 million – to meet cash flow needs, pending approval from the director of the Office of Management and Enterprise Services. But those borrowed dollars would have to be returned to the fund before the end of the state fiscal year.
“The summary of this budget is hospitals got no cuts, providers got no cuts, no member will have a program that will be cut,” Bullard said.
Oklahoma State Medical Association President Dr. Julie Strebel said in a statement the organization is pleased that physician reimbursement rates will remain steady in the coming year and recognizes the “difficult trade-offs” made. Though she said questions remain about how the agency can maintain flat payment rates amid tightening federal Medicaid funding.
“We very well may see a systemwide scaling back of SoonerCare and SoonerSelect patients, more patient denials or greater barriers to care,” Strebel said.
What did OHCA board members have to say?
Several Health Care Authority board members expressed grave concerns about the agency’s financial position entering the new fiscal year following Bullard’s presentation.
“What is not addressed is we will have to figure out from what pot of gold under the rainbow we will be reimbursing the Rate Preservation Fund during fiscal year 2027, because we are only allowed to access those monies if we also are putting them right back in the next six to nine months,” said board member Clark Jolley.
The House and Senate will host an initial public budget performance review with the Health Care Authority within 90 days, Hilbert and Paxton’s letter states. Bullard said meetings with the legislature will occur every 90 days and, if an unforeseen circumstance arises, the agency would have to enter into emergency appropriation conversations.
“That's exactly my point, is that the buck is going to have to go back to the legislature,” Jolley said. “If we don't thread the needle perfectly, we're going to have to get money from the legislature to either A) [support] cash flow, B) go over the one-third amount or C) pay the money back.”
Board member Kevin Corbett, who served as CEO of the Health Care Authority from Sept. 2019 through Aug. 2023, presented a written statement on the budget being developed following “a woefully inadequate appropriation made by the legislature.”
Corbett said, despite immense challenges during the COVID-19 pandemic, the Health Care Authority built more than $1 billion in financial reserves, benefiting from enhanced federal funding. A large portion went toward the Rate Reservation Fund, he said.
But, according to a Health Care Authority report, the agency’s 2024 fiscal year appropriation was reduced to $892.7 million, with $164 million directed to the Rate Preservation Fund.
Portions of that appropriation were mandated to go toward state hospitals and provider grants for Health Information Exchange connection costs, the report states. The agency was also required to self-fund a rate increase for long-term care facilities.
“This resulted in an effective appropriation of $499 million to fund the operations of the Medicaid program for FY 2024, obligating OHCA to use $648 million of cash reserves,” the report reads. “OHCA began FY 2024 with a program cash reserve of $1.028 billion and ended FY 2024 with $247 million.”
Bullard told lawmakers in January during a budget hearing the agency has continued to draw down its cash reserves for budget purposes, causing it to be “a bad flu hiccup away from not having cash flow.”
Corbett said though he’s in favor of approving the modified budget, he’s concerned about variance in the future.
“Looking ahead, I can envision a point in which the agency may, and likely will, report that there are financial shortfalls. And I anticipate the legislature will be quick to suggest, criticize and condemn this agency that is ‘poorly managed or incapable of understanding and controlling its finances,’” Corbett said. “Don't let them get away with it.”
“This agency is staffed with dedicated and very competent public servants who wake up every day to do their very best to serve our members and our taxpayers,” he added. “The legislature has made this bed, and now they must lie in it.”
Jolley stressed the importance of keeping the Health and Human Services appropriations staff apprised of the agency's finances.
“I think it is important for us to communicate diplomatically, kindly, but forcibly to our friends on the fourth floor of the state Capitol building … that this is a problem that they are going to have to solve,” Jolley said. “And there are only so many efficiencies that we can, as an agency, achieve.”
“But at the end of the day, sometimes it comes down to just how much cold hard cash are you going to give us to do our job?”
All seven of the attending board members voted to approve the budget.
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