Legislature May Narrow Rural Tax Credit for Doctors

The House Health Committee approved a $1 million loan forgiveness plan for medical students dedicated to serving in rural areas
The Lund Report


March 13, 2013 — Legislators heard two bills on Monday that would make it easier for doctors and other healthcare providers to practice in rural Oregon.

The House Health Committee quickly approved House Bill 2858, renewing and strengthening the Oregon Primary Health Care Loan Forgiveness Program, while down the hall, the Senate Health Committee delayed a vote on Senate Bill 325 that would extend a tax credit for rural health practitioners.

“I want to consider this tax credit, I just want to be smart about it,” said Sen. Elizabeth Steiner-Hayward, a family physician at Oregon Health & Science University.

The credit is not just open to doctors but also dentists, nurse practitioners and physician assistants. Although it has different rules for different professions, the bill generally applies to primary care providers working more than 10 miles from cities that have a population of 40,000. Currently more than 2,000 providers claim an income tax write-off of $5,000, which will cost the state $8.5 million a year or $17 million over the next biennium.

Democrats such as legislative budget chairman Sen. Richard Devlin of Tualatin have said the state should look as closely at tax expenditures as it does regular expenditures, a comparison Republicans like Sen. Jeff Kruse of Roseburg are less likely to make.

“There’s a difference between a tax credit and a subsidy,” said Kruse, who added this program was easy to support since it has been around since 1989. This particular tax credit will end unless the Legislature takes action.

“We’re subsidizing counties that are fairly rich in having doctors … in a huge part of the desirable parts of the state,” said Jody Wiser of Tax Fairness Oregon.

Hood River and Ashland are included even though they have some of the highest ratios of primary care providers to patients, while, at the same time, poor people in inner-city Portland struggle to get access to a doctor.

“The intent of the program was to increase the availability of providers in rural Oregon,” said Scott Ekblad, the director of the Oregon Office of Rural Health.

Grants Pass has the largest number of providers claiming the credit, with 177, while The Dalles has 100 providers and Hood River has 85. By comparison, towns with severe shortages like Oakridge and Port Orford have only one provider.

“I’m very supportive of the program… but we may need to narrow it down a little bit,” said Sen. Chip Shields, D-Portland. “Even though Multnomah County has a number of hospitals, Hood River has more primary care practitioners per capita than Multnomah does.”

Doctors from east of the Cascades testified however that the rural tax credit is what made them decide to practice medicine in a small community.

“Working in rural Oregon, there is a difference in pay from urban Oregon and this tax credit helps make up for it,” said Dr. Molly Fauth, who works at a federally qualified health clinic in Hood River. “Getting to Portland for some of our patients is as hard as getting to New York.”

“The rural tax credit was one of the things that allowed me to practice in rural Oregon,” said Dr. Gary Plant from Central Oregon. “Five thousand dollars goes a long way in a town like Madras.”

However, there are amendments to this bill that would require physicians who qualify for the tax credit to see a minimum number of Medicare and Medicaid patients as well as a minimum percentage of people in rural areas if they also practice in a more urbanized community.

Wiser of the tax group also would like to lower the population cap for cities from 40,000 down to 20,000 before physicians could receive the rural tax credit and increase the distance from cities.

Dr. Lisa Dodson, the director of rural health programs at Oregon Science & Health University, said medical providers contribute to rural county’s overall economy compared to urban counties. “There is a great economic benefit for the rural tax credit,” said Dodson, who practiced medicine in John Day for seven years before joining OHSU.

House Bill 2858 will replace an earlier tax credit program that ends June 30, and the new measure increases the funding from $525,000 in 2011 to $1 million next biennium.

“The whole purpose of the loan forgiveness program was to have ongoing funding for people willing to work in rural settings,” said Doug Barber, the lobbyist for the Oregon Academy of Family Physicians. “You’ll have a steady stream of motivated, highly trained professionals heading to work in rural Oregon.”

Barber said after the bill passed the Health Committee it was changed in the appropriations process to expire after two years.

“It strikes me as strange that we would take that kind of position,” said Rep. Jim Thompson, R-Dallas. “How are we going to help a handful of students for one year and then the problem goes away?”

The loan forgiveness program is limited to nurse practitioners and medical students in OHSU’s Rural Scholars Program and includes requirements such as 10 percent of clinical training in a rural setting.

“The goal is to make sure we recruit people who are going to work in rural areas,” said Bob Duehmig, spokesman for the Oregon Office of Rural Health.

A physician assistant program at Pacific University may soon join the loan forgiveness program, he said, and Oregon’s osteopathic medical school could qualify by setting up a rural program.

Osteopathic physicians more often specialize in family medicine and got their start in the rural Midwest, but the College of Osteopathic Medicine of the Pacific Northwest, has only been open in Lebanon for two years.

Because the loan forgiveness program pays down the principal of the loan before it starts accruing interest, a student enrolled in the program for three years would receive $105,000 but save $210,000 over the life of a 20-year loan, according to Dodson of OHSU.

She said even if doctors pay 10 percent of their income over 30 years, they won’t have enough money to pay off loans of $250,000 if they enter family practice.

HB 2858 was sent to the Joint Committee on Ways & Means while the Senate Health Committee will likely vote on an amended SB 325 later this month.

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