Lawmakers plan focus on Oregon’s health care spending

This article will be updated.

Health care costs are a problem not only for Oregonians but for the state government itself, and the Legislature will tackle various aspects of the situation in the upcoming short session, lawmakers said Thursday afternoon.

With members of the Legislature looking to cut hundreds of millions from the state budget, three Democratic and one Republican lawmaker found areas of agreement and also policy differences in a freewheeling discussion hosted by the Oregon Health Forum, an affiliate of The Lund Report. They addressed issues of general cost and access, as well as oversight of spending in the health coverage program used by more than 1 million lower-income Oregonians.

 “We are having a bit of a budget challenge that we have to sort of correct midstream,” said Rep. Rob Nosse of Portland, chair of the House Behavioral Health Care Committee. He noted that a revised revenue estimate will be issued on Feb. 4, two days into the session.

“We're about $749 million short of what we need to have an appropriate reserve, cover caseload costs, and [for]the Department of Human Services for their programs, and the Oregon Health Authority for Medicaid, make the investments that we need to make to be able to implement [federal program changes] to the best of our ability,” Nosse said. “We'll get a more accurate number on Feb. 4, and then all of us will begin to get to work and figure out how we're going to balance our state's budget.”

Sen. Sara Gelser Blouin of Corvallis, who heads the Senate Human Services Committee, said the budget is her main concern, and the abbreviated nature of the 35-day session poses a challenge. She said the budget drives policy, and the Legislature should focus on delaying new programs where it can, to avoid ill-considered cuts. “My biggest concern is that we haven't had time to really understand how all of these different budget reductions work. We asked our agencies on a very short timeline to hit a number, and hitting a number is a different conversation than creating a system that makes sense across divisions and across agencies.”

She said she is particularly concerned about the budget of the Department of Human Services, where reductions are proposed to in-home supports for aging people and people with intellectual and developmental disabilities.

“These are critical services that help people live in the community and basically just live,” she said. “But they also are a lot of jobs, and each dollar that we spend in that area brings down more than two additional federal dollars. So the impact of those reductions on our economy can be incredibly significant. And within that were some changes that would remove thousands of children with developmental disabilities from the critical services that allow them to live at home with their parents, instead of in nursing homes or institutions.”

Possibility of new revenue floated

Sen. Deb Patterson of Salem said raising revenue for new investments in health could help the Legislature save money for the state. 

“We need to be sure that in health care that people are getting the right care at the right time, and so I'm in strong support of investing in primary care as much as possible to save. We know that early intervention saves a lot of dollars,” she said. “I would say that any responsible person looking at a budget needs to look at money in and money out, and so cuts aren't necessarily going to be all that we're looking at. We also have to look at the big picture.”

Rep. Ed Diehl of Stayton said he agreed with Sen. Gelser Blouin that certain areas of Medicaid services should be off limits to cuts.

“My biggest concern with what's been proposed with the budget cuts is the impacts on aging and people with disabilities and the [intellectual and developmental disability) community,” he said.

But as far as raising new revenue, Diehl added, “I think raising revenue is off the table. I don't see that happening.”

Nosse said one path to more revenue could be if the state disconnects from some aspects of federal tax cuts approved as part of HR 1, the congressional legislation that spelled out major cuts to the Medicaid program.

Added Patterson,  “We are one of only four states that is not disconnected from the federal tax code ... it is irresponsible of us not to look at all of these issues ... We can't not do this, because we have to have affordable, quality, accessible healthcare for everybody.”

Separate effort pursuing Medicaid cuts

Several lawmakers noted that Gov. Tina Kotek has tapped former Oregon Health Authority Director Bruce Goldberg to lead a group meeting behind closed doors to consider ways to limit spending under the Medicaid-funded Oregon Health Plan.

Diehl said his understanding is that “Everything is on the table. It's our benefit package, it's regulations that might be driving our costs. It's all these knobs that we can turn.” 

But he said the Legislature needs the capacity to pursue similar changes. “I don't want to be bringing Bruce Goldberg out of retirement every few years to fix a crisis. We should have this kind of information available to us.”

One idea he finds appealing: giving the state the ability to negotiate drug prices for the Medicaid program. Currently each of the 11 insurers and nonprofits that operate regional managed care organizations under the Oregon Health Plan — known as coordinated care organizations — can use its own contractor, known as a pharmacy benefit manager, to negotiate separately. Other states have moved away from that system and reported savings.

“If we can do state negotiated pricing, we can bring the cost of drugs down for everybody in the state ... that's a very appealing idea to me,” Diehl added.

Nosse said the coordinated care organizations in Oregon prefer negotiating their own drug prices. But “We're one of the few states that does it that way, and we may be it may be time for us to sort of centralize the purchasing of medications under the Medicaid program in a way that we've not considered before.”

Gelser Blouin said advocates for aging and disabled people need to be part of the discussion, since they rely on Medicaid funding as well. Some of the cuts she's seen discussed are “nerve wracking, because I think people don't understand how that works and what that will look like over time. So I really think we need to bring human services to the table. There's no one there in the Medicaid roundtable, but those are absolutely critical and will fall apart without Medicaid support.”

Complex interplay of cost and access 

Several lawmakers spoke about the importance of addressing Oregon's primary care shortages. Asked about a recent proposal by the Oregon Health Authority to deal with an internal budget shortfall by pulling $170 million from primary care and other providers serving low-income people, Nosse said that was caused by the need to increase spending in the Oregon Health Plan to cover increased behavioral health costs stemming from a well-intended but poorly executed effort to increase behavioral health access.

“We're having a moment where we made a behavioral health benefit available to Oregonians in the state, where we had pretty abysmal behavioral health mental health numbers and pretty bad, abysmal, mental health access for people that needed care. And ... this is a terrible way to say this, but we made too much care available to the extent that it is costing the CCOs too much money and they can't manage the benefit. And that is why we are finding ourselves in a moment where we have not allocated enough money given the utilization.”

He was echoed by Diehl, who said the state has a “warped incentive system where a counselor will be paid quite well to take care of what we call the worried well, and then the folks that are suffering from severe mental illness that are way more challenging are not getting help ... that needs to be fixed. And I also think during COVID we signed up a bunch of behavioral health care providers ...in a good, well intended thing to provide health care, but I don't think we've done a very good job at all at regulating those .. If they were on the OHA list, they could bill for Medicaid and the CCO was not going through any qualification process. I think that has resulted in a lot of wasted money in behavioral health. And when I see that, and I see we're cutting primary care, it doesn't make any sense.”

Affordability efforts underway

Patterson said she is pushing a variety of bills to address the big problems of affordability, accessibility and quality

"They've only been exacerbated by the budget challenges that we're facing with HR 1 and with the fact that the Affordable Care tax subsidies have not been extended yet. Hopefully they will be, but they sure are going to be costing a lot of people, about 200,000 people in Oregon, an awful lot of money.”

One bill would address how hospice programs are regulated in light of a huge push by private equity firms into the market, which critics say has hurt care.

“One in five hospice organizations has changed hands in the last five years out of the 75 hospices that we have, and we have to be sure that the folks have quality care. I know that California has a moratorium. Washington has a certificate of need (approval process). I think we can find a middle ground.”

She said the committee she chairs is sponsoring several bills, such as one to cover the costs of needed follow-up in the event of an abnormal pap smear: “Some folks have been advised to get it, but they can't afford it because it's not covered.”

Another bill of the committee's would require reporting on the effects on affordability of patient assistance programs sponsored by pharmaceutical companies — programs that have been accused by Congressional investigators of being used to prop up high prices.

Still another committee bill would address the increasing frequency of contract standoffs between commercial health insurers and hospital systems over contracts that keep members in-network for purposes of billing. Patterson said the standoff between Salem Health and Regence BlueCross BlueShield is an example of the problems posed for patients. The bill would require mandatory arbitration in the event of a contracting stalemate. 

Other legislation planned

Gelser said the human services committee she chairs is sponsoring legislation intended to address issues pertaining to foster care. It’s intended to find agreement in the wake of a contentious bill pushed by youth providers and health systems that died last year in the face of criticism that it would open the door to abuse.

Another committee bill would look at ways to bring down the cost of services in the developmental disability services programs without cutting provider pay. Yet another would look at how many members of the Oregon Health Plan are employed despite qualifying for low-income coverage, while figuring out which large employers they work for.

Diehl, meanwhile, said he helped craft a bill taken up by another lawmaker that would help rural pharmacies receive tax credits. He also is sponsoring a bill to allow hospitals to better qualify for a federal rural emergency hospital designation program that would boost their Medicare reimbursements. “It's a no-brainer,” he said.

Nosse, for his part, is pursuing a bill intended to eliminate a decades-old state health care cost control program that has been contentious, leading Oregon to not cover some health care procedures that the federal government considers mandatory. Critics say the program's rationing is flawed and inherently discriminatory, while defenders say it ensures transparency and that federal Medicaid dollars are spent on cost-effective care. A push to eliminate it failed in the last legislative session, but the agency is projecting it to pass this year, increasing costs to the general fund by $10 million.

Nosse also has a bill intended to improve the Oregon Health Authority's rate-setting process. Critics have faulted the agency for rate-setting that significantly underestimated Medicaid managed care costs in 2024, then again in 2025 — forcing the Legislature to authorize a chunk of additional behavioral health funding last session to prop up coordinated care organizations that were bleeding red ink.

Then, its most recent budget, the agency massively underestimated its managed care rates, contributing to contentious negotiations that led to PacificSource pulling out of Lane County —leaving thousands without a provider. “They did not think that the rate that was developed by the Oregon Health Authority was going to be enough,” Nosse said. 

He said it could have been worse, calling it “a pretty big scare ... several CCOs were looking like they were going to stop providing Medicaid benefits in certain regions across our state ... So I'm bringing a bill to try to improve the rate process.”

The agency's unplanned rate hikes are what led to an internal agency budget shortfall that, in turn, led Oregon Health Authority leaders to try to cover the agency's budget hole by pulling $170 million from a fund used to pay primary care providers, pediatricians and OB-GYNs serving low-income people — causing some clinic leaders to say they may be forced out of business.

Nosse said he understands why providers are unhappy, since their situation is the result of the unplanned costs caused by the unintended consequences of the state's program to boost behavioral health payments. 

“Medical providers,” he said, are “experiencing some of the challenges of trying to rein the behavioral health benefit costs back in.”