FAQ: How federal changes to Medicaid will affect mental health services in Oklahoma

On July 4, President Trump signed into law the “One Big, Beautiful Bill” — a sweeping budget reconciliation package that the Congressional Budget Office estimates will reduce federal Medicaid spending by $1 trillion through 2034. The bill includes several provisions that modify how states fund and administer their Medicaid programs.  

The bill is expected to have several major impacts on Oklahoma and the more than 1 million Oklahomans enrolled in Medicaid:

• The Oklahoma Health Care Authority estimated that roughly 230,000 working-age Medicaid members could be affected by the bill’s new work requirements.  

• Limiting states’ fees and taxes on hospitals and other health care facilities that are then reinvested in Medicaid systems could reduce Oklahoma’s federal funding by approximately $16 million.

• Cuts to Medicaid could mean a loss of $8.7 billion for Oklahoma hospitals over the next decade, health care leaders warned. Another analysis shows that rural hospitals in Oklahoma could lose $5.13 billion during that time. At a time when rural hospitals are already struggling, these reductions could mean closures, cuts to critical services, and the loss of up to tens of thousands of hospital jobs.  

• While Oklahoma could access funding from the new $50 billion Rural Health Transformation Fund to help offset those losses, it will likely not fully make up for cuts, especially since grants are usually short-term, and Medicaid payment cuts would be permanent.     

In this FAQ, we review some provisions of the bill to help stakeholders understand how they may impact Oklahoma's Medicaid program.

Who pays for Oklahoma’s Medicaid program?

Oklahoma’s Medicaid program — SoonerCare — receives funding from both the federal and state governments. The federal share is the largest, ranging from 67% for low-income adults, seniors, people with disabilities, and families, to 77% for children in families. The state is responsible for the remaining 23% and 33%, respectively.  

The federal government calculates its share of Medicaid based on the three-year average of a state’s per-capita income compared to the national average; the lower the average state income, the higher the federal share.  

In 2020, Oklahoma voters approved a constitutional amendment that expanded Medicaid eligibility to more low-income adults via a constitutional amendment. As of June 2025, more than 237,000 adults are part of this expansion population, which accounts for roughly one-fifth of SoonerCare enrollees. For this expansion population, the federal share of Medicaid is 90%, and the state contributes 10%.

What are the new Medicaid work requirements, and how will they affect Oklahomans?

Beginning in 2027, Medicaid enrollees must complete 80 hours of work, volunteer service, study, or a combination of these activities. The Oklahoma Health Care Authority estimated that these new community engagement requirements will affect roughly 230,000 working-age Oklahomans enrolled in Medicaid.

New Medicaid applicants must prove they have met the community engagement requirement for up to three months before applying, and current members must meet these requirements for at least one month during each eligibility period. The federal government will not approve waivers to avoid the implementation of work requirements, but states will have latitude to make further exceptions for Medicaid members experiencing temporary hardships, such as physical impairments or disruptions from severe weather.

It exempts several populations from these community engagement requirements, including parents with children aged 13 or younger, medically frail individuals, Native Americans, people in alcohol or drug treatment programs, pregnant women disabled veterans, and others.

Although the exemption list is long, many members may still lose coverage due to complex paperwork necessary to demonstrate compliance. Community engagement requirements may impact members with undiagnosed or untreated mental health conditions, as these conditions can interfere with obtaining and maintaining employment, volunteering, or job training. They may struggle with instructions while managing their health, leading to missed deadlines or mistakes such as filling out the wrong forms.  

Moreover, other adults who are not exempt but are active in children's lives, such as noncustodial parents, grandparents, and siblings, may find themselves in a similar position. Coverage losses can impact access to mental health care for adults and also affect children indirectly by disrupting child care and increasing household stress, which in turn can negatively impact their mental well-being and development.

While the health care authority’s analysis suggests the requirements could reduce state Medicaid spending by around $10 million per year, it also noted potential increases in administrative costs to monitor and ensure compliance more frequently.

How will the new cost-sharing requirement impact enrollees?

New cost-sharing requirements in the bill exempt certain adults in the Medicaid expansion population from copayments, including people who are institutionalized and those who receive primary care, emergency care, mental health, substance use treatment, and visits to community health centers, behavioral health clinics, and rural health clinics.  

For all other services, the state will set a co-payment up to $35, but it can't exceed the federal limit of 5% of the family's total out-of-pocket costs. The state will also establish whether a provider can deny a service if a copayment is not received but can also choose to reduce or waive it on a case-by-case basis. This modification is a change from the current law in which copayments are optional.

Oklahoma already imposes copayments for expansion adults. For example, enrollees pay a $4 copay for most services, while behavioral health and substance use are subject to a $3 copay. Behavioral health inpatient services have a $10 copay per day with a $75 maximum. Due to the new cost-sharing exemption, the health care authority will likely remove behavioral health and substance use-related services from Oklahoma’s copayment schedule.  

Increasing the copayment to $35 per service would impact expansion adults, especially those with chronic conditions. A recent analysis found they are likely to pay more than 5% of the family income limit. For an expansion enrollee making 100% of the federal poverty level —$15,650 a year — that limit would translate to no more than $783/year in out-of-pocket costs. However, the analysis found that if the enrollee had three or more chronic conditions, they could pay up to 8% out-of-pocket costs, or over $1200.  

Others may choose to skip seeking treatment to avoid costs, which in turn would worsen their health needs and potentially increase health care costs to the state due to higher emergency hospital care.

How will changes to provider taxes impact Oklahoma’s Medicaid financing?

Almost all states collect taxes and fees from certain health care providers to reinvest back into their Medicaid system as compensation for low provider reimbursements. Because states contribute to the system by reimbursing providers, this spending receives federal matching funds. Oklahoma law requires hospitals to participate in the Supplemental Hospital Offset Payment Program (SHOPP) unless they qualify for an exemption.

The new federal bill prohibits expansion states like Oklahoma from creating new provider taxes and requires them to progressively lower the rates on existing taxes and fees to 3.5% by 2032 and beyond. Oklahoma’s current rate is capped at 4% — an analysis by OHCA shows that reducing the cap to the required 3.5% in 8 years would shrink federal funding to Oklahoma by approximately $16 million.  

Ultimately, this change pushes states to look for an alternative funding source, cut benefits, or reassess reimbursement rates — including for behavioral and rural health providers — to make up funding shortages.

What impact might the limits on state-directed payments have on Oklahoma’s Medicaid financing and rural providers?

State Medicaid agencies can require managed care entities to make certain payments to providers for specific purposes, like enhancing service access and quality.  

These payments, called state-directed payments, are often used to offset the impact of low Medicaid rates on providers who serve large numbers of Medicaid clients.

For example, the Oklahoma Health Care Authority requires managed care entities to make a value-based payment to private and public community mental health centers to incentivize managed care provider enrollment and access to mental health services for members.  

State-directed payment arrangements also direct managed care entities to make a performance-based payment to hospitals. In April 2024, the Oklahoma Health Care Authority paid $252.4 million in state-directed payments to hospitals.

Under the new law, existing state-directed payments will be capped. But beginning in 2028, payments must be cut by 10% annually until they reach the Medicare payment rate. For states that expanded Medicaid, any new state-directed payments cannot exceed the Medicare rate.

A large share of Oklahoma’s state-directed payments comes from provider taxes, and losing the flexibility to reimburse higher payments could impact future hospital finances and overall access to essential services in the state. The change could be especially harmful for rural providers, who rely heavily on Medicaid funding to keep their doors open.  

A freeze on state-directed payment rates could also be problematic if Medicaid reimbursement rates don't keep up with health care costs. If state-directed payments cannot be increased or are reduced, services including mental health care could become less accessible. This could put Oklahoma insurers at risk of violating parity laws, which require equal access to mental and physical health care.

Health care industry leaders warn that Oklahoma hospitals could lose approximately $8.7 billion over the next decade. According to a different analysis, rural hospitals in Oklahoma alone might lose $5.13 billion during that time. This reduction would hit rural hospitals hardest, and these facilities are already struggling. These losses could mean hospital closures, cuts to critical services, and tens of thousands of people losing hospital jobs.  

However, to ease the burden on rural hospitals and providers, Congress created a $50 billion “Rural Health Transformation Program,” half of which will go to states to be distributed to rural hospitals, rural health clinics, community health centers, mental health centers, and opioid treatment programs.

The other $25 billion will be distributed at the Center for Medicare and Medicaid Services administrator’s discretion, and the administrator can cut or claw back Rural Health Transformation funding if he disapproves of how states choose to spend the dollars.

Ideally, some of the money would flow to Oklahoma’s rural hospitals to help offset projected losses. But while grant funding can provide relief, it might not fully make up for the cuts — especially since grants are usually short-term, and Medicaid payment cuts would be permanent.     

How will changes to Medicaid eligibility verification affect enrollment?

States must now verify the eligibility of people in the expansion population every six months instead of once a year. More frequent eligibility checks will likely increase administrative costs as Oklahoma will have to redetermine eligibility twice a year for more than 230,000 adults.

States already have methods in place to determine if a change in eligibility has occurred between renewals. This additional requirement will likely result in more people losing access to services over missed deadlines, address verifications, or paperwork submissions.

This enhanced burden is especially challenging for people with a serious mental illness, particularly those without stable housing, whose treatment plans and medication management necessitate stable, continuous care. A loss of coverage, and thereby stable care, increases the chances of someone experiencing a mental health crisis, which results in more costly care and potentially life-threatening situations.

How could the new retroactive coverage policy affect access to treatment or provider reimbursement?

States cover medical expenses up to 90 days before Medicaid applicants submit their request for coverage. Beginning in 2027, this retroactive coverage will be limited to one month prior to the application for expansion adults, and two months prior to the application for traditional Medicaid members.  

Retroactive coverage has long been a protection for people who might only qualify for Medicaid after a medical event or mental health crisis. For example, suppose a lower-income adult is hospitalized for a severe psychotic episode in January. After the hospital stay, the individual applied for Medicaid in March — Medicaid would cover the hospital and provider bills under the 90-day retroactive coverage. However, under the new 30-day policy, the January hospitalization bills would go unpaid, the patient would face medical debt, and providers would absorb the financial loss.  

Reduced retroactive coverage means higher out-of-pocket costs for lower-income people. When combined with other provisions in the bill, such as more frequent eligibility checks and new community engagement reporting requirements, changes to retroactive coverage will impose additional barriers to treatment.  

What impact will the bill have on plans available on the Health Insurance Marketplace?

Many Oklahomans on health insurance plans through the Affordable Care Act (ACA) Health Insurance Marketplace receive federal subsidies — also called premium tax credits — that make coverage more affordable.  

Starting in 2026, certain people will be ineligible for these credits because of their immigration status. In 2028, most non-citizens will not qualify for the premium tax credits unless they have specific legal status (such as permanent residents or Cuban or Haitian refugees). Each enrollee’s eligibility for these federal subsidies must be redetermined every year with no more automatic reenrollment.    

If someone is disenrolled from Medicaid or denied an application for failure to meet community engagement requirements, they are also disqualified for federal subsidies of ACA Marketplace plans.

Under the new law, people who enroll in a Marketplace plan mid-year because of income changes won’t qualify for credits. If a person's income increases during the year and they receive too much in subsidies, they’ll have to pay all of it back when they file their taxes. Previously, there was a limit on how much a person would have to repay; now, the limit is gone.

However, the bill did not renew premium tax credits, so they will expire for everyone — regardless of immigration status or income level — Dec. 31, 2025, without further legislative action.  

Oklahoma Insurance Commissioner Glen Mulready warned in a March news release that the expiration of these credits would mean higher insurance premium costs for the 300,000 Oklahomans on ACA Marketplace plans.  

The average cost of a “silver” tier ACA Marketplace plan in Oklahoma is $58 per month with federal subsidies in place. Without the subsidies, the average cost would jump to $153 per month, a 65% increase.

If the tax credits expire, people who cannot afford the higher costs for ACA Marketplace plans — especially lower-income and rural populations — may be forced to go without health insurance. National estimates project that 4 million Americans could become uninsured if the tax credits expire, which is likely to push mental health care even further out of reach for many Oklahomans.