Reversing a stance he has publicly touted throughout his term, Gov. Kevin Stitt announced Thursday he will support expansion of Oklahoma’s Medicaid program to include up to 628,000 able-bodied adults at a state taxpayer cost of as much as $374 million annually.

The governor said the state government tab for expansion will be funded through a fee/tax increase, redirection of state tobacco settlement funds, and cost-shifting to the federal government.

Stitt’s announcement was made in Washington, D.C., where federal officials announced the Trump administration will allow expansion states to seek “Healthy Adult Opportunity” waivers that allow slight modifications to Medicaid expansion programs.

“Oklahomans want their federal tax dollars to be returned to the state and put to work,” Stitt said.

The announcement represented a stark about-face from Stitt, who has long said he opposes Medicaid expansion due in part to its high cost. As recently as May, the governor explicitly said any health plan he offered would not be designed to capture federal matching dollars designated for Medicaid expansion.

Under the traditional Medicaid program—which provides coverage to the aged, blind, and disabled—the federal government currently provides just under $2 for every $1 in Oklahoma state government spending.

But under the federal Affordable Care Act, better known as “Obamacare,” states are given $9 in federal funds for every $1 spent on able-bodied adults added to the program. Under the federal law, states that expand Medicaid must include all able-bodied adults earning up to 138 percent of the federal poverty level. Oklahoma is currently among states that have not expanded the program.

During the press conference, Centers for Medicare and Medicaid Services Administrator Seema Verma noted the federal waivers would apply only to non-disabled adults younger than 65—“that can include the expansion population”—but not the aged, blind, and disabled currently served by Medicaid in Oklahoma, meaning Oklahoma cannot apply for a waiver without expanding its Medicaid program.

Verma also said the flexibility given to states will not include changes to eligibility.

“We’re making it very clear that states cannot lower the income standard if they want to continue to receive the enhanced matching rate that they receive for the expansion population,” Verma said. “So if they do a smaller, targeted program for non-disabled adults, they will not receive the higher match rate. So we’re not allowing partial expansions that would include a higher match rate.”

She also said the services mandated under the waiver plan would be more expansive than those offered under traditional Medicaid. States would be required to cover all services now mandated for private plans sold through federal insurance exchanges under the Affordable Care Act.

“The minimum standard has to be the essential health benefits, which are the benefits that are offered in the exchanges,” Verma said. “The states have a lot of flexibility, but the essential health benefits that are offered in the exchanges is a comprehensive set of benefits that includes mental health services and prescription drug coverage, both of which are not required today in the Medicaid program, but would be required under the Healthy Adult Opportunity.”

Reduced drug costs were one of the few specific areas where officials said Medicaid savings could be achieved through the waiver program. Officials also said states could base provider payments on results, rather than services alone, which they suggested would result in cost savings.

States that apply for a waiver could receive either a capped annual payment for the Medicaid expansion population, or they would be paid on a set per-enrollee basis.

Under the announced federal waiver program, Stitt said Oklahoma will seek to establish “moderate premiums” for able-bodied adults added to Medicaid, along with work requirements. He also said officials would seek to provide higher reimbursement to rural health care providers, and expand opioid treatment.

That appears to largely duplicate Indiana’s Medicaid expansion program, which involved similar requirements. However, in practice the work-requirement and cost-sharing provisions were seldom applied and Indiana recently abandoned them in the face of a lawsuit. Indiana’s state actuaries projected the modified Medicaid expansion would cost taxpayers nearly $366 million more than traditional Medicaid expansion in the first year alone, and in 2019 the subsequent surging Medicaid costs were projected to consume 66 percent of all new state revenue in 2020 and 30 percent in 2021, which was cited as one reason Indiana teacher pay raises did not advance in 2019.

According to prior estimates, Medicaid expansion would include up to 628,000 Oklahomans and could result in as much as 40 percent of the state population becoming Medicaid-eligible. Based on current Medicaid expenses, that translates into a state cost of $374 million annually.

Supporters of expansion argue the vast majority of people eligible for Medicaid coverage under expansion will forgo it, and say just 200,000 will sign up. In other states that have expanded Medicaid, similar low-ball estimates badly miscalculated actual enrollment and per-person costs. In 2018, The Foundation for Government Accountability found expansion cost taxpayers 157 percent more than initial projections in all states where data was available.

Stitt appeared to be basing his financial plans on similar assumptions of a very low take-up rate for Medicaid, saying in a separate release that he expects the state cost of expansion will be $150 million.

To cover that projected $150 million expense, Stitt plans to seek an increase in the Supplemental Hospital Offset Payment Program (SHOPP) fee, a de facto tax on hospitals and medical providers. The current rate is 2.8 percent. Stitt said he plans to raise it to 4 percent.

Stitt also wants to fund Medicaid expansion by redirecting state tobacco settlement funds, paid yearly by tobacco companies. That change will require a vote of the people.

The governor also claimed undefined “savings” will occur through shifting most of the cost of some services in the Oklahoma Department of Corrections and the Oklahoma Department of Mental Health and Substance Abuse Services to the federal government as the result of Medicaid expansion.

Due to an initiative-petition effort, Medicaid expansion will also be on the ballot later this year via State Question 802. It appears that proposal and Stitt’s plan will be largely identical, although the ballot measure would make Medicaid a constitutional right for able-bodied adults and it does not include any work requirements or cost-sharing provisions.

If Stitt’s plan is adopted and the initiative petition also wins voter approval, the ballot measure would supersede Stitt’s plan. But if Stitt’s plan is adopted and the ballot measure is defeated, Medicaid would be expanded in Oklahoma regardless of voter wishes.

Supporters of Medicaid expansion dismissed Stitt’s plan.

“What we are hearing from the governor right now sounds like a tactic to distract voters—not a serious attempt to deliver care,” said Amber England, director of the Yes on 802 campaign. “As the conservative think tank the American Enterprise Institute pointed out, any Medicaid expansion plan that includes block grants isn’t legal and wouldn’t survive a court challenge.”

In a statement, the Oklahoma Policy Institute said Stitt’s plan “includes elements that will inevitably draw lawsuits from health care organizations and advocates who fight to protect the rights and coverage for low-income residents.”

Similar criticisms were raised by national organizations that have supported Medicaid expansion.

Rick Pollack, president and CEO at the American Hospital Association, and Mark Parkinson, president and CEO at the American Health Care Association, criticized the Centers for Medicare & Medicaid Services’ proposed waiver program, saying “the bleak reality is that Medicaid funding is already inadequate. Enacting this proposed rule would cut up to $50 billion nationally from the Medicaid program annually, further crippling Medicaid financing in many states and jeopardizing access to care …”

Pollack and Parkinson also predicted communities “could lose access to care under this proposal, especially in rural areas …”

The plan was also panned by Oklahoma Council of Public Affairs president Jonathan Small, a critic of Medicaid expansion.

“Republican plans to expand welfare aren’t any better than Democrats’ plans to expand welfare,” Small said. “In fact, sources ranging from the Government Accountability Office to state actuaries have found that Republican plans to expand welfare in Indiana, Arkansas and other places actually cost more than Democrats’ welfare-expansion plans. The broad proposal unveiled today basically adds conservative window dressing to Obamacare’s expansion of Medicaid, and the result of expansion will be the same as what we have seen in other states: exploding costs, higher taxes, and stagnant or worsening health outcomes.”

Small added that Medicaid expansion “consistently fails to generate meaningful improvement in health outcomes, and indirectly rations care for the most vulnerable already on Medicaid, while increasing health care prices for everyone else due to the cost-shifting that occurs because of Medicaid. And the icing on the cake is Medicaid expansion has led to increased taxes in many cases. There’s nothing in Oklahoma’s proposal under the federal waiver that would change that trajectory.”

House Speaker Charles McCall, R-Atoka, said Stitt’s Medicaid-expansion plan was “a far better plan than putting Obamacare in the Constitution with no flexibility,” and said it “swiftly brings our federal dollars home to help Oklahomans in a far more responsible fashion than the state question. It also has responsible funding mechanisms, which the state question does not.”

Rep. Marcus McEntire, R-Duncan, a longtime supporter of Medicaid expansion, said he was “optimistic” but claimed Stitt’s plan expands Medicaid “without raising taxes on Oklahoma citizens.”

In pursuing Medicaid expansion, Stitt joins a group that includes his predecessor, former Gov. Mary Fallin. In 2016, Fallin also proposed a slightly modified form of Medicaid expansion. Fallin’s plan did not gain legislative approval.

Oklahoma was the only state that has not already expanded Medicaid to participate in the federal Centers for Medicare & Medicaid Services press conference announcing the expansion-waiver offer.