Oral arguments heard by Oklahoma Supreme Court for 2017 legislation and Medicaid funding at risk

Posted on: 8/9/17

As we have reported earlier in Hotline, the Cigarette Fee (SB 845) was challenged as a revenue raising measure. On Aug. 8, the Oklahoma Supreme Court heard oral arguments in this case and several others. We expect a ruling by Aug. 25, which is the date the cigarette fee will begin to be collected. This case is important to hospitals as SB 845 levied a fee on tobacco manufacturers and $215 million of this was appropriated in the general appropriations bill (SB 860) to three health agencies: Oklahoma Health Care Authority (OHCA), Oklahoma Department of Mental Health and Substance Abuse Services (ODMHSAS), and the Oklahoma Department of Human Services (OKDHS).

Tobacco companies filed suit June 7 with the Oklahoma Supreme Court, alleging the cigarette fee of $1.50 per pack in SB 845 did not follow the provisions of the Oklahoma Constitution that prohibit revenue-raising measures from being passed in the last five days of the session, require a supermajority, and require the legislation to start in the House. The suit, titled Naifeh et al v State of Oklahoma, was filed by R.J. Reynolds Tobacco Co. and Phillip Morris USA, the nation’s two largest tobacco companies, and joined by two Oklahoma retailers, a wholesaler and three residents.

If the cigarette fee is overturned and the Legislature does not act to restore the revenue, Becky Pasternik-Ikard, CEO, OHCA, has stated the agency will look to cut optional programs, such as dialysis and pharmacy, in addition to cutting provider rates by up to 8 percent. If a special session of the Legislature is not agreed to by the governor, Senate and House, there will be cuts to all Medicaid providers.

As stated in a July 31 Tulsa World article, “The loss of the $70 million allocated to the Health Care Authority would amount to an 8 percent cut to Medicaid providers. However, officials said efforts would be made to ensure the impact of the cuts would be minimized by looking at other cost-saving measures.” To view the article, “Oklahoma Health Care Authority could lose as much as $120 million in funding,” click here.    

In addition to the $70 million allocated from the cigarette fee to the OHCA, the ODMHSAS received $79 million and OKDHS received $69 million. Both ODMHSAS and OKDHS have already stated that they cannot absorb cuts of this magnitude without cutting provider rates to their Medicaid providers, many of which have already sustained cuts in 2017.

The questions of the Court focused on the text of SB 845 raising a cigarette fee and whether the raising of the fee would compensate the agencies that received the funds for the services they provide to smokers. From observation of the arguments, the Justices appeared to agree with the state that the price of the cigarette being increased did in fact have an impact on the consumption of cigarettes. For example, Justice Combs asked, “Why did the Legislature appropriate such a small amount of money to fund cessation? It appears to go to fund government generally.” The state attorney general’s office later responded to a similar question, saying “The missions of these three agencies have a nexus (relationship) to smoking cessation. I don’t think the Court should look at where the money goes to decide this case on whether the fee is a revenue raising measure.”  

For further discussion on the oral arguments on the four bills, read the Oklahoma Watch article.

OHA will keep the membership informed once a decision is rendered by the Oklahoma Supreme Court. (Sandra Harrison)