"The state is currently experiencing a serious physician workforce shortage, and it is likely only going to get worse without some type of intervention," the application said.
The proposal was estimated to require $115 million in federal funds.
In its denial letter posted Thursday, the CMS noted that the state's Medicaid program, SoonerCare, received similar funding before 2001 and subsequent waiver renewals didn't include requests for that money.
But the CMS discovered in 2015 that Oklahoma continued to claim federal matching funds for the payments. When the state failed to explain why it could use Medicaid money for these supplemental payments, the CMS froze federal payments going to the medical schools.
Oklahoma subsequently requested to amend SoonerCare to reinstate the state university payments in August, but the CMS said it was uncertain whether the waiver met federal requirements.
Medicaid payments must be linked to the delivery of services to Medicaid beneficiaries, and it's unclear how these payments to the schools meet that threshold, the CMS said.
"We understand that Oklahoma is facing a variety of issues related to training and retaining a healthcare workforce, as well as a particularly challenging budget situation," the CMS said in the letter. "However, at this time, CMS does not see a path to approval for the state's proposal to receive federal Medicaid match for payments made to the above described universities."
Oklahoma Medicaid officials did not return a request for comment. A spokesman for the University of Oklahoma, which houses one of the state's largest medical schools, declined to comment.