Kotek Backs Proposal to Lower Hospital Payments through Public Employee Health Insurance

House Speaker Tina Kotek wants to rein in the high costs that Oregon hospitals charge to provide healthcare for state employees and instead to peg the cost to twice what the federal government is willing to pay through Medicare.

“The state is paying up to 672 percent of Medicare,” Kotek said. “The idea that price and utilization are linked is not borne out by the data. [House Bill 3418] could increase transparency in pricing and result in significant savings” -- as much as $30 million a year -- a significant chunk of change as the state faces a $1.6 billion deficit.

House Bill 3418 would set hospital payments and other medical service rates at twice the rate of Medicare. The bill does not apply to rural hospitals, primary care or behavioral health services, but it does also apply to ambulatory surgery centers.

Kotek came to the HB 3418 public hearing with a wingman, Rep. Greg Smith, R-Heppner, the long-serving moderate Republican from Eastern Oregon who sits as the ranking member of the Committee on Ways & Means.

“We believe that the state has the authority over the health plan for the design of its employees,” said Smith.

HB 3418 also has the backing of the House Health chairman, Rep. Mitch Greenlick, D-Portland. “This is a very timely bill,” he said.

The bill is opposed, as expected, by the Oregon Association of Hospitals & Health Systems, but more surprisingly by America’s Health Insurance Plans, as well as Rep. Knute Buehler, R-Bend, a physician opposed on principle to the idea of fixing prices to Medicare.

“It’s sad to me that we’re trading delivery system reform for price controls,” Buehler said.

Buehler also opposes balance-billing legislation for the same reason. House Bill 2339 would require insurers to pay providers they don't have contracts with 175 percent of Medicare, saving consumers who are currently hit with unexpected high charges when they end up with an out-of-network provider such as an anesthesiologist at an in-network hospital.

The Bend Republican said that Medicare rates are determined through a political process, based on what the government is willing to budget, not based on market forces. HB 2339 also left the House Health Committee on Wednesday on a party-line vote.

But many hospitals across the state can set high prices because they hold geographic monopolies, including in Buehler’s home district of Bend, where the St. Charles Health System has tremendous leverage on insurers and the Public Employees Benefits Board, or PEBB, as the default provider for all of central Oregon.

Prices in the metro area vary wildly -- an Oregon Educators Benefit Board study showed Legacy Health was charging twice the rate paid by Medicare, while for-profit Willamette Valley Medical Center in McMinnville charged more than four times the rate of Medicare for the same services.

For several years, PEBB did yeoman’s work to keep the cost of healthcare from rising above inflation. These efforts were so successful that the Legislature took $120 million from PEBB reserves to cover employee salaries. But last year, Providence reported that claims costs were rising at 5 to 10 percent, blowing the 3.4 percent cap mandated by the Legislature and forcing PEBB to draw on its reserves, as the money the state budgeted for PEBB still only grew at 3.4 percent a year.

Shaun Parkman, PEBB vice-chairman and a representative of Service Employees International Union, said that the Affordable Care Act eliminated most of the uncompensated care hospitals previously provided, but only hospitals had benefited from that savings, not insurers or those buying health coverage, despite claims that they had “cost-shifted” or previously charged insurers higher prices to make up for those losses.

“They have pocketed most of that difference,” Parkman said. “One wonders how not-for-profit some of the non-profit hospitals are.”

Freddy Sennhauser of All-Care, a Grants Pass-based health insurer that administers coverage both for PEBB and the Oregon Health Plan, supported HB 3418. Providence did not testify on the bill.

“It will level the playing field for small players like us,” and make it easier for the smaller insurer to get fair contracts with all the hospitals in southern Oregon, Sennhauser said.

Reach Chris Gray at [email protected].