OKLAHOMA CITY – In a recent video ad opposing a state question to expand Medicaid, a hammer comes crashing down on a pink piggy bank as a voice warns that approving the proposal will lead to “higher taxes and cuts to core services.”
The warning – that Oklahoma will be forced to hike taxes or slash state spending – is one of the principal arguments made by those leading the charge against State Question 802, including Gov. Kevin Stitt. Voters will decide on the measure in Tuesday’s election.
At stake is whether Oklahoma should expand its Medicaid health coverage to an estimated 215,000 low-income adults. Thirty-six other states have accepted expansion.
How Oklahoma would pay for its share of the costs, estimated at $164 million by the state, has been a focal point of the debate.
Opponents have argued the state’s enrollment estimates are too low and that the costs will be significantly higher. They also note that about a third of the expansion states either increased taxes on alcohol or cigarettes or added fees on hospitals, insurance companies or their Medicaid program to cover some of the costs.
But some health policy experts, along with supporters of the state question, say that fears of Medicaid expansion leading to a state budget disaster are overblown and not what most other states have seen.
“There have been multiple studies in individual states and nationally looking at the effect on state budgets,” said Adam Searing, an associate professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families. “There is overwhelming evidence that the effect has been neutral, minimal or positive.”
What studies show
In a study cited by Searing, a team of Harvard and Massachusetts Institute of Technology researchers found that expansion states saw a 24% increase in Medicaid spending between 2013 and 2018 compared to non-expansion states.
But the study, published this month in the New England Journal of Medicine, found little to no impact on state budgets and discovered “no evidence that Medicaid expansion forced states to cut back on spending on other priorities, such as education, transportation or public assistance.”
The study outlined several reasons.
One is that the federal government has paid at least 90% of the costs for the expansion population.
Additionally, the study found, a Medicaid expansion that is heavy in federal funding offsets spending in other areas, such as direct subsidies to hospitals and mental health centers or in the corrections system. Non-expansion states traditionally pay those costs out of their own state revenues.
“Thus, Medicaid expansion appears to be a win–win from the states’ perspective – giving health insurance to millions of low-income adults and offering financial support to safety-net hospitals, without any adverse effects on state budgets,” the researchers concluded.
A review of national and state studies by the nonprofit Henry J. Kaiser Family Foundation also found “no significant increases in spending from state funds as a result of Medicaid expansion and no significant reductions in state spending.”
The group’s report says state spending could rise because the federal match declined to 90% this year. It was covered 100% by federal funds from 2014 to 2016, before gradually dropping to 90% in 2020 and beyond.
But the report said studies of individual states, including Louisiana and Montana, found that expansion “resulted in large infusions of federal funds into the states’ economies and significant state savings” even after the state’s share went up.
Robin Rudowitz, a vice president of the foundation and author of the group’s report, said a number of states saw costs and enrollment projections that exceeded estimates – a concern that is also frequently raised by SQ 802 opponents.
But she said the impact to the states has been relatively small because the federal government covers the vast majority of the costs.
“So the analysis related to state economic outcomes are positive,” she said.
How much it would cost
That’s not to say states, including Oklahoma, wouldn’t have to pay more, at least initially.
If SQ 802 is approved, the expansion must take effect by July 1, 2021. Because there is no funding tied to the ballot measure, the Legislature next session would need to find a source of money.
How much is up for debate. The funding is tied to how many people actually enroll and to next year’s economic conditions.
The most consistently cited numbers are the Oklahoma Health Care Authority’s estimate that 215,000 will enroll, costing a total of nearly $1.4 billion; Oklahoma would need to pick up $164 million of that amount.
But that cost is expected to increase as a result of job losses from the shutdowns over the COVID-19 pandemic – a crisis that has made more people eligible for the subsidized insurance. Unknown is whether the economy will rebound next year.
The authority has not published revised estimates on the effects of the pandemic on the potential cost. But agency spokesperson Katelynn Burns said projections done in May found the state expected nearly 47,000 additional adults to be eligible if Medicaid expansion took effect July 1 of this year.
Others have suggested that the state’s cost will be much higher than the $164 million. However, they haven’t provided details backing up those statements.
In speeches and interviews, Stitt has repeatedly said he thinks the state’s share of expansion costs will be $200 million or more. In a campaign email sent to supporters Thursday he wrote that it “could cost Oklahoma taxpayers up to $374 million annually.” He did not provide details of calculations.
When asked at a press conference Thursday how he arrived at those numbers, Stitt did not say how he came to those estimates. When he deferred to Health Care Authority Director Kevin Corbett, Corbett said that the latest estimates show it would cost $164 million to $200 million.
A crucial question is how hard it would be to find $164 million, especially if the economy remains stagnant.
To put that number into context, Oklahoma spent $1.7 billion in state funds on its existing budget, which is more than a fifth of Oklahoma’s total $7.7 billion budget.
The last time lawmakers needed to raise taxes was in the lead-up to the teacher walkout of 2018, when the Legislature found about $450 million in new revenue by increasing taxes on oil and gas production, cigarettes and fuel in order to give teachers a pay hike.
At the Thursday press conference, Stitt repeated his assertion that to find money for Medicaid expansion, Oklahoma would need to either increase taxes – which he said he wouldn’t support – or make cuts in “education, transportation or public safety.”
Oklahoma Democrats, who support expansion, argue that higher taxes or cuts to core services wouldn’t be needed.
House Minority Leader Emily Virgin, D-Norman, said legislators should consider instead the now-defunct funding plan Stitt called for earlier this year.
The governor’s SoonerCare 2.0 plan, announced in January, called for a traditional Medicaid expansion this July and then seeking a federal waiver to make changes next year, including adding a work requirement and requiring many enrollees to pay modest premiums.
The first phase of Stitt’s plan, which would have expanded Medicaid in a similar way to SQ 802, proposed using these measures to cover the state’s cost, then estimated cost at $150 million:
• Cost savings from the Department of Corrections and Department of Mental Health and Substance Abuse, where millions of dollars currently are being paid with 100% of state funds.
• An increase in the Supplemental Hospital Offset Payment Program (SHOPP) fee paid by major hospitals.
• Funds from the Tobacco Settlement Endowment Trust.
Lawmakers passed the SHOPP increase, which was expected to generate $134 million, and favored using state savings to pay for the rest. In a surprise move, Stitt vetoed that proposal, effectively killing hopes to expand Medicaid this year.
“The bottom line is that this shows that there is a way to fund this without any taxes at all,” Virgin said. “So I think it’s disingenuous to say (taxes or cuts) will happen if Medicaid expansion passes.”
Jonathan Small, president of the conservative-leaning Oklahoma Council of Public Affairs think tank, which opposes expansion, said SQ 802 organizers should have attached a funding source if they were serious about giving Oklahoma voters a true choice.
“I mean, at least David Boren had the guts and honesty to include a funding mechanism to pay for the things he wanted,” Small said, referring to the failed 2016 state question to boost K-12 education funding through a sales tax increase. Boren, then University of Oklahoma president, led the effort.
Amber England, campaign manager of the Yes on 802 campaign, however, said it’s the Legislature’s job to create a state budget and determine how it is funded.
“If we put in a funding mechanism, they would just complain about whatever funding mechanism we put in there,” she said. “So I think this is another way for the opposition to muddy the waters as voters try to make up their minds.”
Concerns over future years
But next year’s budget is not the only concern.
SQ 802 proposes to amend the state constitution to require Oklahoma to cover the expansion group, consisting of those making up to 138% of the poverty level. That means changes could only be made through another popular vote.
Opponents of the state question argue this is one of its fatal flaws because it will remove any flexibility for the state to respond to economic problems or to adjust if Congress ever reduces the federal 90% match.
Stitt also addressed this point in the campaign email sent Thursday.
“SQ 802’s Medicaid expansion gives the federal government and liberals in Congress like Nancy Pelosi more control of Oklahoma’s health care,” Stitt said, referring to Congress’ ability to change the federal-to-state funding ratio at any time.
But Searing, of Georgetown University, said that so far there has been little or no movement in Congress to make states pay more.
He said the Democratic-led House recently took up legislation that would provide more federal funds for states that are later adopters of expansion. The Patient Protection and Affordable Care Enhancement Act, which was unveiled last week, calls for the federal government to cover 100% of the expansion costs for the next three years if non-expansion states accept the expansion now.
“Of course, anything could happen,” Searing said. “Congress could all of a sudden say we’re going to stop funding the highway system or other things, but I think the chances of that are pretty small.”
Oklahoma Watch is a nonprofit, nonpartisan news organization that produces in-depth and investigative content on a wide range of issues facing the state. For more Oklahoma Watch content, go to oklahomawatch.org.