Oklahoma health providers fear they'll bear costs after cigarette tax falls
A cigarette fee that would have balanced Oklahoma's budget has gone down in flames, and some health care providers worry cuts could devastate rural services if lawmakers don't come up with more revenue.
The Oklahoma Supreme Court ruled Thursday that a $1.50-per-pack “fee” on cigarettes was actually a tax. The state has strict laws on passing taxes, including requiring a three-quarters majority to pass one, and the cigarette measure fell short.
The court's decision raised fears of cuts to Medicaid and other social services programs. The tax would have raised $215 million, including:
•Department of Mental Health and Substance Abuse Services: $75 million
•Oklahoma Health Care Authority: $70 million
•Oklahoma Department of Human Services: $69 million
Charles Danley, CEO of Grand Lake Mental Health Center in Nowata, said centers that provide mental health care under a state contract can't absorb large budget reductions. In many parts of the state, there aren't enough providers in private practice to step in if the centers had to cut back, he said.
“It would be devastating for rural Oklahoma, because services in rural areas are hard to come by anyway,” he said.
- Related to this story
- Video: Oklahoma Supreme Court strikes down cigarette fee
If their funding falls, the centers might only be able to serve people who are in mental health crisis, rather than helping them avoid a crisis by treating them early, Danley said.
“Everybody will be affected. The police will be affected. The emergency rooms will be affected,” he said. “It's like a tsunami.”
Other providers worried about cuts to Medicaid payments. Nico Gomez, president and CEO of the Oklahoma Association of Health Care Providers, said cuts could force nursing homes out of business. Long-term care facilities are particularly vulnerable because an average of 70 percent of their patients have coverage through Medicaid, he said.
“We cannot sustain any rate cut,” he said. “These are businesses that are trying to stay solvent.”
In March, the Oklahoma Health Care Authority reported it would need $69 million in new funding to avoid Medicaid rate cuts to providers, and could cut rates by as much as 8 percent if the state held its budget flat.
Becky Pasternik-Ikard, OHCA's CEO, told lawmakers that providers would stop treating patients covered by Medicaid at some point if reimbursements fell too low, but she wasn't sure if an 8 percent reduction would hit that tipping point. The agency cut rates by 3.25 percent in 2010, 7.75 percent in 2015 and 3 percent in 2016.
Rural nursing homes would be hit particularly hard if Oklahoma cut its state contribution to Medicaid, Gomez said, and patients might have to move away from their home towns to find an open bed.
The state would also lose matching federal funds, bringing the state's total losses to $519 million if legislators can't replace the $215 million from the cigarette fee, said Craig Jones, president of the Oklahoma Hospital Association. Even if they do pass a plan, state agencies may have to make some cuts because the revenue won't be available on the day the governor signs it, he said.
“The hole just keeps getting deeper and deeper,” he said.
Jo Stainsby, spokeswoman for the Oklahoma Health Care Authority, which oversees the state Medicaid program, said it's too early to speculate on whether rate cuts will be necessary. Officials don't know if lawmakers will return for a special session or if they will vote to raise more revenue, she said.
The state will continue to reimburse medical providers at the current level and on the usual schedule, Stainsby said.
“Once we know how big a hole we're working with, then we can move forward,” she said. “Everything will proceed ‘business as usual' until we know what we're doing.”
Ed Lake, director of the Oklahoma Department of Human Services, also wasn't ready to specify what cuts his agency might have to make if lawmakers don't make up the lost funding.
“Obviously, our agency could not absorb a $69 million cut to our budget, but we are not ready to declare the sky is falling just yet,” he said in a written statement. “We will be working closely with the governor's office and members of the House and Senate on solutions to this loss of revenue.”
The Oklahoma Department of Human Services already cut more than $29 million from its budget in the current fiscal year. The cuts included reducing payments to foster families, cutting the number of senior meal sites, freezing the number of low-income families receiving child care assistance for six months and dropping the number of hours that people with disabilities can receive at-home services each week.
The legislature didn't pass a line-item budget, so agencies would have some discretion about which programs to cut, said Joe Dorman, CEO of the Oklahoma Institute for Child Advocacy. Still, it's likely some children's programs, like payments to foster families, would have to sustain more reductions, he said.
“The agencies have made some pretty tough cuts,” he said. “You can only make so many cuts before reducing down these critical services.”