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With Medicaid Expansion, Oklahomans – and State Budget – Will Benefit Quickly

Oklahoma’s voter-approved Medicaid expansion takes effect Thursday and, thanks to aggressive state enrollment strategies and a large federal financial incentive for states to newly expand Medicaid under the Affordable Care Act (ACA), the state is set to enjoy a quick increase in health coverage and huge benefits to its budget.

More than 120,000 people are already enrolled in expansion coverage in Oklahoma (though it won’t take effect until Thursday). That’s largely because Oklahoma used some successful strategies of other states to efficiently enroll large numbers of people so that, starting Thursday, these individuals can immediately benefit from expansion coverage. Oklahoma, for instance, moved many of the low-income adults who’ve received limited Medicaid benefits under a longstanding federal waiver into expansion coverage.

To date, the federal government has been paying 68 percent of the cost of covering this group, and the state has been paying the rest. The state will save money by moving this group into expansion coverage, for which the federal government will pay 90 percent. These individuals will also benefit because, with expansion coverage, they will no longer pay a monthly premium, as they have paid under the waiver.

Medicaid expansion will benefit Oklahoma in a variety of ways, evidence shows. Across the country, those who gained coverage are healthier and more financially secure than those without expansion coverage, and longstanding racial disparities in health outcomes, coverage, and access to care narrowed significantly. Nearly half of the uninsured Oklahomans who will become eligible for Medicaid are people of color, we estimate.

Oklahoma will also be the first state to benefit from the large financial incentive in the American Rescue Plan, which President Biden signed into law in March. That incentive gives a state that now expands Medicaid a two-year, 5-percentage-point increase in the share of costs that the federal government pays (i.e., the federal medical assistance percentage, or FMAP) for its non-expansion Medicaid enrollees, who account for most of a state’s Medicaid enrollees and costs. That will give Oklahoma $860 million more in federal funds, we estimate, and ensure that the federal government more than covers the cost of expansion coverage.

Meanwhile, policymakers in Missouri, where voters also approved a Medicaid expansion ballot initiative last summer, are still trying to derail implementation by arguing in court that the initiative was unconstitutional. They also continue to voice concerns about the cost of expansion, despite estimates showing that expansion would produce net savings for Missouri. What’s more, those estimates were compiled before the Rescue Plan, which will provide an additional $1.7 billion in federal funding to the state over two years once expansion coverage begins. Yet the fate of health coverage for some 275,000 low-income Missourians who were expected to enroll in expansion coverage remains in limbo.

The continued resistance of policymakers in Missouri and other non-expansion states underscores the need for the President and Congress to enact policies in the upcoming recovery legislation that provides health coverage to the 2.2 million uninsured people in non-expansion states (60 percent of whom are people of color) who are caught in the “coverage gap” — they have incomes below the poverty line, which is too low to qualify for subsidized health insurance coverage in the ACA marketplaces, yet they don’t qualify for Medicaid under their states’ rules.

In recent weeks, support has grown on and off Capitol Hill for a comprehensive “federal fallback” that provides coverage to people in non-expansion states. For example, letters from Senators Raphael Warnock and Jon Ossoff, a collection of over 60 civil rights and other organizations, and members of the House Congressional Black Caucus, Hispanic Caucus, and Asian Pacific American Caucus have called for federal action that closes the coverage gap. Policymakers should heed these calls and act.