Cigarette tax is considered to help fund Medicaid

A proposed $1.50-per-pack cigarette tax is needed to stabilize a Medicaid system in danger of collapse, Oklahoma Health Care Authority CEO Nico Gomez said Thursday.

Without a major cash infusion, many health care providers simply will stop seeing Medicaid patients, he said at an informational public meeting. A million people use the system yearly.

“We believe a $1.50-per-pack cigarette tax is the way to fund this,” Gomez said. “Not because we want to pick on smokers. We know taking care of people who smoke costs us three-and-a-half times more money than people who don’t smoke.”

The tax would provide $182 million a year. Tax hikes like this require a three-quarters vote of the Legislature.

If the authority doesn’t get the extra money, it will have to cut the rate it pays

to Medicaid providers. Gomez has filed notice of the potential for a 25 percent rate cut.

Such a cut would cause some health care providers to drop out of the system, further limiting care options for Oklahomans, particularly in rural areas. The nursing home industry said many of its businesses would fail.

The Oklahoma Hospital Association and the Oklahoma Association of Health Care Providers urged approval of the cigarette tax in a letter to legislators on Thursday.

“The current situation is so tenuous that any further cuts, let alone the Oklahoma Health Care Authority’s proposed 25 percent reduction, would send Oklahoma’s health care system into an irreversible free fall with mass closures of medical facilities being a certainty,” the letter said.

There’s a real potential for a humanitarian crisis if nursing homes go out of business, leaving vulnerable elderly people with nowhere to go, the letter said.

Despite these scary scenarios, the Legislature appears unresponsive to the tax demands.

Leading lawmakers said Thursday it would be difficult to muster the required three-quarters majority.

House Speaker Jeff Hickman said that even without the tax hike, lawmakers may be able to somewhat protect the Health Care Authority.

The proposed 25 percent Medicaid provider rate cut is prefaced on a 15 percent funding reduction to the authority, and the reduction likely will not be that big, he said.

House Democratic Leader Scott Inman said that rather than impose a new tax, the state should reverse a 0.25 percent decrease in the state income tax rate that went into effect on Jan. 1 even as oil industry declines were draining state coffers. His idea has not gained traction among the Republican majority.

Gov. Mary Fallin suggested the cigarette tax in her State of the State speech at the start of the legislative session in February among a series of revenue-enhancing measures to close a $1.3 billion hole in the budget that will go into effect July 1.

However, no legislation providing major new sources of money has advanced in the first 10 weeks of the four-month legislative session.

The cigarette tax is just one of several financing options for a plan the Health Care Authority has drawn up to stabilize Medicaid, expand the Insure Oklahoma health system and reduce the uninsured rate in the state.

The proposal calls for a state investment that would be matched on a 9-to-1 basis by the federal government.

Capitol leaders have been generally supportive of this idea, but finding state funding remains the big problem.

In addition to the cigarette tax, the authority has suggested fees to hospitals and health carriers. Other money would come from savings that would occur as some Medicaid recipients would be shifted to subsidized medical insurance.

The current situation is so tenuous that any further cuts, let alone the Oklahoma Health Care Authority’s proposed 25 percent reduction, would send Oklahoma’s health care system into an irreversible free fall with mass closures of medical facilities being a certainty.” LETTER TO LAWMAKERS FROM OKLAHOMA HOSPITAL ASSOCIATION AND THE OKLAHOMA ASSOCIATION OF HEALTH CARE PROVIDERS