State Could Lose More Than $115M in Funds for Medical Education

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Trevor Brown/Oklahoma Watch

The OU College of Medicine is part of the OU Health Sciences Center. The college, along with the OSU College of Osteopathic Medicine in Tulsa, trains the bulk of the state's physicians.

Update: The latest estimates from the State Board of Equalization on Dec. 20 put the possible total impact to the state budget for the loss of the federal Medicaid match as $78.9 million for fiscal year 2018 and $62.8 million for FY 2019. This story has been updated to reflect the latest estimates and the impact on medical schools. 

Oklahoma’s two medical schools could lose more than $115 million because the state spent Medicaid dollars on training doctors for well over a decade apparently without approval, Oklahoma Watch has learned.

The University of Oklahoma and Oklahoma State University’s medical schools also could need an emergency injection of about $30 million from the Legislature this fiscal year because of the dispute with the federal government over a Medicaid waiver. The money would get them through June 30. The schools would need $115 million, according to a letter from the Centers for Medicare and Medicaid Services that was obtained by Oklahoma Watch.

Budget officials cautioned that the estimates were a work in progress and were likely to change as they gathered more information.

The dispute started in 2015 when the federal agency, which oversees the Medicare program for seniors and states’ Medicaid programs for the poor, found Oklahoma’s waiver to get federal matching funds for medical training at the University of Oklahoma Health Sciences Center and Oklahoma State University Center for Health Sciences hadn’t been renewed since 2001. Despite that, the federal government continued making Medicaid matching payments through the program.  It’s unclear why the payments continued for so many years.

Michael McNutt, a spokesman for Gov. Mary Fallin, said his office was working to forestall a funding cut.

“We are working with our congressional delegation and the Trump administration to resolve the issue. Maintaining our medical schools for training future doctors is a high priority of Gov. Fallin,” he said.

On Monday, legislators began a second special session, this time to address a shortfall for Medicaid and to avoid provider rate cuts. However, on Wednesday the  Board of Equalization briefly discussed the latest estimates on what the state would need to make up the shortfall.

In a joint statement to Oklahoma Watch after the meeting, OU and OSU medical school leaders noted the severity of the potential loss of federal funds.

“The reference to the Centers for Medicare and Medicaid Services’ decision to potentially discontinue a waiver in place for 20 years in the Board of Equalization update today points to the seriousness of this issue,” said the statement from OSU’s Dr. Kayse Shrum and OU’s Dr. Jason Sanders. “Since the waiver allows the State to cover the costs of physicians on the frontline of caring for the state’s Medicaid population, the loss of this funding could impair the state’s ability to deliver services through OU and OSU medical schools. That said, we are exploring options at the federal and state levels. To that end, we are appreciative of our federal delegation and state officials who are working with purpose to address this matter.”

The Oklahoma Health Care Authority said it continues to communicate with CMS “to explore alternative paths to support workforce development.” The authority receives about $3 billion annually in federal participation funds for its Medicaid program.

“This is an issue between the state and the federal government around a long-standing supplemental payment program for medical schools in recognition of the higher cost of the service delivery associated with their teaching mission,” health care authority CEO Becky Pasternik-Ikard said in a Dec. 15 statement. “These funds are used for physician workforce development to strengthen and sustain access to care for our SoonerCare members.”

Under the waiver, the state appropriates money to the two medical schools, which direct the money to the Oklahoma Health Care Authority in order to get federal Medicaid matching funds. The Health Care Authority then sends the larger pool of money back to OU and OSU medical schools. Their associated teaching hospitals serve a large percentage of poor and uninsured patients, and the medical schools train the bulk of the state’s future physicians through their residency programs.

Sen. Ervin Yen, an anesthesiologist, questioned the timing of the federal denial and wondered if it was connected to other issues with federal money at the Oklahoma State Department of Health. He said it complicates an already challenging budget situation at the Capitol.

“It will have a terrible impact, especially when we have a shortage of rural physicians in the state,” said Yen, R-Oklahoma City. “We need more physician graduates in this state, not less.”

 In August, the state asked if it could amend the broader SoonerCare program to include spending Medicaid matching funds on medical education, seeking to continue what it had been doing since 2001.

But the Centers for Medicare and Medicaid Services last week rejected the state’s proposal, saying it would not match the medical school payments in the previous quarter. That makes the state responsible for $31 million in funding this fiscal year.

“From the time CMS first identified and raised this concern to Oklahoma, we have continually asked the state to provide additional information to justify the state’s authority to make these payments,” the federal agency said in a Dec. 11 letter to the health care authority. “However, we have not received such information.”

The letter said Centers for Medicare and Medicaid Services supports the state’s goal of expanding the health-care workforce and recognizes “a particularly challenging budget situation.”

“However, at this time, CMS does not see a path to approval for the state’s proposal to receive federal Medicaid match for payments made to the above described universities,” the letter said. “Medicaid payments must be linked to the delivery of services to Medicaid beneficiaries and, if authorized under the state plan, must be in compliance with all other applicable limits.”

The state has 60 days to appeal the determination.

Correction: A previous version of the story incorrectly suggested that the $30 million shortfall for the Oklahoma Health Care Authority related to teaching hospitals was the direct reason for Monday’s special session.