Hospitals question fee increase to help pay for Medicaid expansion

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OK hospitals are not happy about a proposed 1.5% increase on the “taxes” they pay to get more federal draw down funds.


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OKLAHOMA CITY — Despite an influx of hundreds of millions of federal dollars earmarked to help pay for Medicaid expansion, lawmakers are proposing increasing fees paid by hospitals with the money to be used for the same purpose.

“While we’re not opposed to doing our part to increase access to care, we are disappointed that the Legislature chose not to use the hospital fee as a backstop considering that we have federal funds available for the next eight quarters,” said Patti Davis, president of the Oklahoma Hospital Association.

She said the state’s hospitals are still in “recovery mode” from the pandemic, and they would prefer legislators would first use the hundreds of millions in additional federal funding before increasing their assessment rate.

The state’s Supplemental Hospital Offset Payment Program, or SHOPP fee, is a self-assessment that allows hospitals to maximize federal Medicaid matching funds by supplementing state Medicaid funding.

Senate Bill 1045, which already cleared the state Senate this week, would increase that assessment rate from 2.5% to 3% for calendar year 2022, then raise it to 3.5% in 2023 and finally to 4% in 2024.

Currently, 68 hospitals are obligated to pay the fee out of their annual operating budget, including those in Duncan, Claremore, Chickasha, Enid, McAlester, Stilwell, Ada, Norman, Tahlequah, Muskogee, Oklahoma City, Tulsa and Stillwater.

In a bid to help states, Davis said the federal American Rescue Plan Act earmarked specific funds to states to cover costs of Medicaid expansion. Oklahoma received more than enough to cover its expansion for the first two years, she said.

“While we understand it’s one-time funds, we were certainly hoping that that might provide a little bit more gap for hospitals,” she said.

Davis also said she hasn’t gotten any clarity from the Health Care Authority or the Legislature just how exactly they’re going to use that supplemental federal funding.

Melissa Richey, a spokeswoman for the Oklahoma Health Care Authority, said there is no explicit directive from the federal government over how those American Rescue Plan and Families First Coronavirus Response Act funds are to be used.

The state agency has received only $240 million in enhanced federal funds to date, she said. The benefit is received over time and not as a lump sum.

State Rep. Kyle Hilbert, R-Bristow, the House author, said the federal coronavirus funds went toward Medicaid expansion, which freed up $164 million in state money to be put into a rate preservation savings account. That brings the fund’s balance up to about $197 million.

In 2019, the Legislature created the fund to save a portion of the match the state receives on its federal dollars when its reimbursement rate is high. The amount the state receives from the federal government fluctuates based on the health of the state’s economy, Hilbert said.

Because Oklahoma’s economy is thriving and its budget has seen a $1 billion surplus, lawmakers are bracing for a steep drop in the reimbursement rate in the next three years.

In the past those drops resulted in provider rate cuts, but the new rate preservation fund is designed to prevent cuts across the board, Hilbert said. The state’s current match rate is 68%, but could drop as low as 50% depending on the health of the economy, he said.

Every 1% drop in federal matching funds will cost taxpayers about $54 million, he said.

The new SHOPP fee is expected to generate $37 million in the first year, and will help offset some of the $164 million price tag to pay for Medicaid expansion, he said. Lawmakers expect an additional 200,000 people to be eligible for the program.

Hilbert said it’s irresponsible to pay for ongoing expansion expenses with one-time revenue sources.

“It’s just like drawing down your retirement fund to start making payments on your mortgage,” he said. “Eventually you’re going to run out of retirement money. You’ve got to have some revenue source to help fund your ongoing expenditures, and that’s why the increase in SHOPP is necessary to fulfill the will of the Oklahoma voters and funding Medicaid expansion.”

Janelle Stecklein covers the Oklahoma Statehouse for CNHI’s newspapers and websites. Reach her at

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