Issue Brief: State Spending on Health Care in Oklahoma

November 09, 2018

Understanding the Issues: State Spending on Health Care in Oklahoma

Public spending on health care comprises a large and growing portion of the state’s annual spending. For Fiscal Year 2019, the Legislature appropriated over $1 billion for health-related spending, which is more than 20% of the state’s overall appropriated spending for the year.

In FY 2017, the Oklahoma Health Care Authority (OHCA), which administers Medicaid, CHIP, and Insure Oklahoma, spent a total of $5,292,148,089. Of that total, $1,780,135,601 were state funds. For every state dollar spent on health care programs, the federal government matched with $1.51.

Why Health Care Costs are High

Oklahoma has the second highest uninsured rate in the nation. The hidden costs of uncompensated care from the uninsured individuals who are unable to pay their health care bills results in higher health insurance premiums for those that are insured. Oklahoma has the ninth highest rate of uncompensated care in the nation, which equates to over half a billion dollars in uncompensated costs annually for Oklahoma hospitals alone. These costs are passed on to Oklahoma consumers with private insurance and to the state, which provides public insurance.

What Can Be Done to Lower Health Care Costs?

Accepting Federal Funds

Since the passage of the Affordable Care Act, states have had the option to expand Medicaid eligibility to anyone earning less than 138% of the federal poverty line, with the federal government offering to cover the large majority of the costs of the expansion. From 2018 on, the federal government is offering states that choose to expand Medicaid eligibility federal funds equal to 90% of the cost of expansion.

U.S. map color coded for states that have expanded Medicaid and states that have not expanded MedicaidAs of November 2018, 37 states, including DC, have accepted federal funds, but Oklahoma is not one of them. In 2014, the first year of Medicaid expansion under the Affordable Care Act, the percent of people who were working but had no health insurance dropped by nearly twice as much in states that expanded Medicaid compared to states that did not expand.

If Oklahoma had accepted federal funds from 2017 to 2021, more than $14.5 billion would have been inserted into our state’s economy and more than 24,000 health care related jobs would have been created.

Medicaid Managed Care

Oklahoma's Medicaid program currently operates under a fee-for-service (FFS) model. Under the fee-for-service system, the state reimburses doctors, hospitals and pharmacies directly when they provide a service for someone enrolled in Medicaid. In order to control costs and make state spending more predictable, some states have contracted with managed care organizations (MCOs) to operate certain aspects of their state Medicaid system.

Under a Medicaid managed care system, states move away from the traditional fee-for-service model and instead pay private managed care organizations a set fee based on the number of individuals they cover, regardless of the services utilized during that month. This model is intended to reward efficiency in the system while encouraging health care providers to keep enrollees healthy in order to avoid costly treatments.

Oklahoma began the process of implementing Medicaid managed care for the aged, blind, and disabled population of Medicaid enrollees, but this transition was halted in 2017 due to changes in federal health care regulations. Discussions have since continued, however, and legislation continues to be filed to bring Medicaid managed care to Oklahoma. 

Issue Brief: State Spending on Health Care in Oklahoma | Issues