‘SHOPP’ fee measure clears Senate, heads to House as national group announces opposition

With a strong bipartisan vote of 39-9, the “SHOPP” (Supplemental Hospital Offset Payment Program Act) cleared the Oklahoma state Senate yesterday afternoon (Monday, April 25). The measure in an earlier form easily cleared the state House. However, a national group’s opposition could impact prospects in the next round before the lower chamber, which will take up the Senate-amended version within the next few weeks.

House Bill 1381 would allow participating hospitals to levy a 2.5 percent fee on “net patient revenue,” according to the state hospital association. That revenue would trigger federal dollars that could be used to serve uninsured Oklahomans, primarily Medicaid recipients. 

Soon after the Senate vote, in a statement sent to CapitolBeatOK, Craig W. Jones, president, Oklahoma Hospital Association, said:

“We are very pleased that with the Senate’s strong vote today, this important health care legislation is one step closer to enactment. … SHOPP will enable Oklahoma to receive its fair share of federal matching funds to preserve patient services provided by Oklahoma hospitals. This legislation, aimed at covering the cost of care hospitals provide to many of Oklahoma’s most vulnerable patients under the state’s Medicaid program, will strengthen the ability of hospitals across the state to continue the current levels of service to their communities.”

“Oklahoma routinely uses federal matching dollars to support the cost of transportation needs and other aspects of the state’s budget. Forty-six other states already have a program such as SHOPP in place. If Oklahoma doesn’t take advantage of the federal match, the money will go to other states.”

Also applauding the Senate action was Fred Morgan, president of the State Chamber, Oklahoma’s association of commerce and industry. Morgan told CapitolBeatOK: 

“Escalating health care costs are an ever-increasing concern to Oklahoma businesses, especially in this economic climate. We should not continue to shift these costs to insured people and businesses simply because they have the ability to pay. This legislation will help continue our efforts to make health care both affordable and accessible to all Oklahomans.”

Opposition to the idea came from Americans for Tax Reform (ATR), a national organization based in Washington, D.C., with a strong base in the Sooner State. 

ATR President Grover Norquist, in a letter to Senators dated yesterday, said, “Despite claims that loses sustained by Oklahoma hospitals under H.B. 1381 would be repaid with additional financial support by matching federal government funds, there is no auditing mechanism in place to guarantee that these hospitals will not shift their initial losses onto consumers in Oklahoma. It is not in the self interest of profit-seeking entities of such great size to incur these fees without passing on at least a portion of the burden to their consumers.

“Additionally, H.B. 1381 represents a scheme to game Medicaid. The bill would only further addict Oklahoma to a failing system, leaving local hospitals reliant more and more on handouts from the federal government. According to the Oklahoma’s Comprehensive Annual Financial Report, spending on Health Services comprised nearly 30% of total state government spending.” 

Norquist said his group will “score” support for SHOPP as a violation of ATR’s “no new taxes” pledge. (Norquist and U.S. Senator Tom Coburn, a popular Oklahoma conservative, have been involved in a public relations joust in recent days. Norquist is accusing the conservative stalwart of going “soft” on taxes during debates over methods to reduce massive federal budget deficits.) 

ATR has previously argued, “Giving additional money to states changes their ‘fiscal behavior,’ encouraging them to increase spending and taxes… States receive matching federal funds based on the revenue they collect. This encourages states to increase taxes to generate more revenue to receive more aid… Overall, these aid transfers to states are comparable to the parent who continually gives their spendthrift child more and more money every week. Rather than learning some fiscal restraint, the child continually spends with the assumption he will receive more.”

The Oklahoma Council of Public Affairs (OCPA), a free market “think tank” in Oklahoma City, has critically analyzed state health care costs, pointing to “the alarming growth in Medicaid, the joint federal-state medical welfare program. According to the Oklahoma Health Care Authority’s FY-2010 annual report, in FY-2005 the number of Medicaid enrollees served was 629,703 and expenditures totaled $2.81 billion, but by FY-2010, the number of Medicaid enrollees had mushroomed to 881,220 (about 24% of the population) and expenditures had ballooned to $4.33 billion — an increase of 54% in just five years.”

David Blatt of Oklahoma Policy Institute told CapitolBeatOK the fee was a modest and practical step, saying, “We think this is a very sensible way to help pay for health care services. It should help shore up the state budget and support the financial viability of Oklahoma hospitals.” 

A prominent businessman, Larry Nichols of Devon Energy Corporation, argued in a recent (April 6) commentary that the provider fee is “worth supporting.” He wrote for The Oklahoman, the state’s largest newspaper: 

“When it comes to health care, the most burdensome cost is a hidden tax. Cost shifting is the practice undertaken by any business when its products are taken without compensation for cost. In retail, cost shifting takes place to compensate for shoplifting or bogus checks. When some people don’t pay for what is taken, the rest of us pay through higher prices.

“The same is true with hospitals. When users can’t pay, those of us who have insurance or pay directly pick up the tab through the hidden tax of cost shifting. But it’s not just those who can’t pay who cause cost shifting. In Oklahoma, cost shifting is exacerbated by the federal-state partnership program known as Medicaid that does not pay its full share.

“Currently, Oklahoma’s Medicaid program only reimburses hospitals at 67 percent of the federally allowable level — a level that on average is below the cost of the services provided. How do hospitals make up the difference? They pass it on in the form of higher medical and insurance costs to those of us who do pay.” Nichols said the proposed fee “would lessen the need for cost shifting. Embraced by those who will pay the assessment, this is one fee that cannot be passed on to consumers. Instead, because the fee will be used to get federal matching dollars, it will be savings, not costs, that are passed on to consumers.”  

Speaker of the House Kris Steele, a Shawnee Republican, has supported the fee. When it cleared the House last month, he said, “I support the bill. I believe we have a proposed bill that all hospitals and health care providers can live with.” He told the Shawnee News Star, “The reimbursement rate is about $3 returned to every $1 paid. Federal laws require hospitals to treat patients, this bill would reduce cost shifting. The system now shifts the cost onto people who can pay, and that’s one of the reasons health care cost have skyrocketed.”  

Sen. David Myers of Ponca City, a conservative Republican, sponsored the bill. The 39 votes for the measure included leading members of both parties, with President Pro Tem Brian Bingman of Sapulpa, a Republican, agreeing with Minority Leader Andrew Rice of Oklahoma City, a Democrat. The nine opponents included eight Republicans and one Democrat.