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Is Oregon Holding To A 3.4% Cap In Rising Medicaid Spending? Maybe Not.

February 3, 2020

In the years following the Affordable Care Act’s expansion of Medicaid, state officials looked for innovative ways to cap rising health care costs as the expansion swelled the pool of low-income Oregon Health Plan patients needing care.

Thus emerged a magic number: 3.4%. 

That figure was approved under a federal waiver in 2012 that set up Oregon’s unique Medicaid system, based on regional coordinated care organizations and prevention. Under the waiver, Oregon promised to  reduce its annual rate of health care spending by two percentage points, down from 5.4% historically to 3.4%.

Since 2012, that figure has been used repeatedly by officials from the Oregon Health Authority up to Gov. Kate Brown’s office.

“We’ve had incredible success in the public sector with the Medicaid work that we’ve done over the last several years with health system transformation, capping per capita growth at 3.4%,” Tina Edlund, health policy advisor for Gov. Kate Brown, told a state committee studying health care cost last fall. “We’ve achieved that every year of the waiver.”

There’s just one problem: Oregon Health Authority officials can’t show the public how that 3.4% target is being met. And the agency’s own publicly available data paint a far less rosy picture of Oregon’s Medicaid cost-growth efforts.

An analysis of annual filings on the agency’s Health Policy and Analytics website shows a sharp uptick in expenditures starting in the 2017-18 fiscal year. On a monthly per-member basis, costs rose 11 percent between fiscal year 2016-17 and 2017-18, from $480 to $533. In 2018-19 costs rose to $572 per month, a 7.3% hike.

Since 2013-14, total spending on Oregon Health Plan patients has eclipsed 3.4% in all but one year, according to the health authority’s report of global expenditures. And there have been increases in the cost of patient care even though the Medicaid caseload has stabilized in recent years after rapid growth immediately following the Medicaid expansion.

Health authority officials say the data fail to show a full picture of cost growth. The agency’s chief financial officer, Dave Baden, said the annual reports don’t account for a range of services like mental health drugs and long-term care where cost-containment goals have made strides. Other changes, like shifting hospital reimbursement rates as more Oregonians with costly health needs joined the Oregon Health Plan rolls, have affected the numbers as well.

“I’d argue that we can still say that,” Baden said of the 3.4% target. Still, he did not dispute the higher calculations.

“There are only certain expenditures that are subject to valuation,” Baden said. “The hard part of all of this is that these apples-to-apples comparisons from any year to another aren’t easily there. … It is difficult to suss out the year-over-year change.”

Capping costs is crucial to maintaining Oregon’s Medicaid system, specialists say.

“The whole point of the benchmark is controlling the overall growth of costs,” said Numi Lee Griffith, health care advocate for Oregon State Public Interest Research Group, or OSPIRG, a consumer advocacy organization. “It’s about keeping the cost of the program at a sustainable level so we’re not continually needing to find new sources of funding to keep it at the current service or to start making hard choices about maintaining that service level. If costs were growing too much, we might be in a position where we would have to talk about cutting back the benefit package in some way which would be bad.”  

The federal government approved a five-year waiver extension for the state’s coordinated care model, which took effect last year. As part of that extension, Baden said meeting the terms of the two-percentage-point test only required the state to cap annual cost growth over time.

Yet officials have frequently touted the state’s purported success in capping cost growth at 3.4% each year.

Gov. Brown’s health care policy office says on its website that one of its recent accomplishments as “limiting annual premium increases and per member per month costs to no more than 3.4% percent.” State lawmakers and Oregon Health Authority policy officials repeatedly touted that figure as an annual cap throughout last year’s legislative session, which resulted in a bill that paves the way for an eventual cap on commercial insurers. Independent analyses cast doubt on state claims that its holding to 3.4%. A 2017 audit of the Oregon Health Authority’s coordinated care rate development process found that per-member-per-month costs over the previous year “grew at a rate that far outpaced the expected sustainable rate of growth of 3.4%.” A draft audit found on the Oregon Health Authority website a year prior pegged cost year-over-year growth at 8.9%. 

Baden said it’s a challenge to publicly show health care cost data with so many moving pieces, some of which are beyond the state’s control. The health authority has even struggled to interpret the data it receives from its coordinated care organizations each year.

Oregon Lawmakers last year passed a bill backed by the Oregon Health Authority to create more uniform financial reporting standards for CCOs, which are required to submit annual financial reports.

 “That’s one thing from my end that I’m excited about as we move into CCO 2.0, is a stronger focus on fiscal transparency and accountability,” Baden said.

You can reach Elon Glucklich at [email protected].