House Passes $15 Billion Budget for Oregon Health Authority

Most Republicans balk at the 21.6 percent increase from last biennium, but an OHSU economist said the state will see a net savings by providing Oregon Health Plan coverage to 240,000 more people under the Affordable Care Act. The budget also calls for three new mental health residential treatment centers in Pendleton and expansion of an intervention program for youth experiencing a mental breakdown.
The Lund Report

 

July 3, 2013 — The Oregon Health Authority budget passed the House on a highly partisan 35-23 vote, with only Republican Rep. Bob Jenson of Pendleton crossing party lines to support the $15.2 billion budget with the Democratic majority.

The health budget is 21.6 percent higher in total funds than 2011-13, reflecting the state’s move to expand the Oregon Health Plan to 138 percent of the federal poverty level and provide coverage to 180,000 to 260,000 more Oregonians starting next January. The cost for those new health plan recipients will be completely covered by federal dollars through 2017 under the Affordable Care Act.

“This budget opens the Oregon Health Plan to low-income Oregonians in 2014, ending the healthcare lottery that created healthcare winners and losers,” Gov. John Kitzhaber wrote in a statement after the budget passed. “Combined with the coming launch of Cover Oregon, the state’s health insurance exchange, this means we are on our way to 95 percent of Oregonians having coverage, increasing their economic security and reducing medical debt, which is good for the whole state.”

The vast bulk of the federal Medicaid money will be distributed to coordinated care organizations, which deliver healthcare locally to people on the Oregon Health Plan through a global budget.

Besides Jensen, the Republicans balked at the Medicaid expansion, raising alarms that there might be a billion dollar hole in the 2015 budget and another $1.5 billion hole in 2017. The Republican vice-chairman of the Health Committee, Rep. Jim Thompson of Dallas, said giving those low-income Oregonians access to health insurance would only overload an already strapped system.

“I think we’re making a mistake bringing 240,000 more individuals into the system,” said Thompson. “We don’t have the practitioners to deliver that healthcare.”

“We have made promises we can’t afford to keep,” said Rep. Dennis Richardson, R-Central Point, who paraphrased former British conservative Prime Minister Margaret Thatcher. “We cannot continue to spend indiscriminately other people’s money because sooner or later we run out of other people’s money.”

Medicaid Inflation Capped at 4 Percent

But Sen. Richard Devlin, D-Tualatin, the Senate budget chairman, told The Lund Report the talk of a billion dollar hole was misleading, and this would only happen if Oregon’s healthcare delivery transformation failed. The Republican numbers also assume the state will decide not to renew the hospital assessment when the current one expires in 2015.

The coordinated care organizations are tasked with limiting the growth in healthcare spending to 4.4 percent in 2014 and 3.4 percent in 2015. Those same inflationary standards will be placed on the Public Employees Benefit Board as well as the Oregon Educators Benefit Board — something that may prove particularly challenging to a healthcare financing system that has struggled to control costs.

“At the national level, while they settle for a 6 percent increase in healthcare costs, Oregon, she flies with her own wings,” said Rep. Nancy Nathanson, D-Eugene, the co-chairwoman of the Human Services Budget Subcommittee. “We’re capping that inflation at 4.4 percent.”

Roughly half the funding for the Oregon Health Authority — $8.8 billion will come from federal sources, while $600 million will be raised through the hospital assessment tax. The state lottery contributes $10.5 million to the health agency’s budget.

The Oregon Health Authority will also receive $120 million in tobacco master settlement dollars, with another $4 million of those dollars going toward tobacco prevention and $4 million for physical education in public schools.

Rep. Peter Buckley, D-Ashland, the House budget chairman, said the state would be reinvesting millions into mental health and addictions programs that will be saved once people are on the Oregon Health Plan.

The state will use some of that $45 million to build three new residential mental health treatment homes on the site of the old Eastern Oregon Training Center, the former institution for people with intellectual and developmental disabilities.

The Oregon Health Authority budget increased spending on children’s mental health programs by $22 million, including $1.8 million to expand the Early Assessment and Support Alliance program statewide. It offers intervention to adolescents and young adults suffering from a mental breakdown.

Economist Disputes Sustainability Alarm

Devlin did give more credit to the Republican argument that the state may face challenges with the matching funds for the new Oregon Health Plan members once the federal government requires states to pay up to 10 percent of those costs.

“It’s a problem that’s going to be down the road, and it’s going to be significant,” Devlin told his colleagues at the Ways & Means Committee on Friday. He also cast doubt on the federal government’s ability to keep its promises in a time of self-imposed austerity, particularly given the uncertainty of political power in the latter half of the decade.

But in a study prepared in conjunction with Oregon Health & Science University and the State Health Access Data Assistance Center, the state budget will actually save $79 million by accepting the federal money through 2020, at the same time offering insurance to 260,000 more people and expanding care to 65,000 adults currently on the Oregon Health Plan.

Even if the state has to pick up 10 percent of the tab, OHSU economist Peter Graven said that’s about as good of return on investment as the state could get from the feds.

“You get a higher match rate than we got before,” Graven said. The state currently pays about 40 percent of the costs for the 65,000 low-income adults on the Oregon Health Plan, and will save about $147 million a year once the federal government picks up that 40 percent to give these adults more robust coverage, including expanded dental care.

To continue providing for the 325,000 adults on Medicaid, the state would have to pay about $161 million a year, but by accepting $2 billion in federal dollars each year, it will generate $61 million in additional revenue. It will also save $37 million a year in programs for people who would otherwise be uninsured.

The OHSU study also says Oregon can expect to save $18 million annually in its public employee health plans, since fewer uninsured people will be heading to emergency rooms and driving up the cost of care.

All told, the study still anticipates about $47 million in general fund costs in 2019 — which, in a $15 billion budget, is “a rounding error,” Graven said.

“It’s not free,” the economist said. “It’s about as close to free as you can get.”

The Oregon Health Authority budget, also known as House Bill 5030, still must pass the Senate, but the vote is expected to be less partisan. Sen. Bill Hansell of Pendleton and Sen. Jackie Winters of Salem — both Republicans — supported the budget in the Ways and Means Committee.

Image for this story by 401(K) 2013 (CC BY-SA 2.0) via Flickr.

Christopher David Gray can be reached at chris@thelundreport.org.

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