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Devlin: Oregon Would Forfeit Federal Money if Tax Referendum Held

The Republicans fighting the tax appear to have bungled their way toward the ballot, as the top legislative attorney believes that the 0.7% tax on hospitals will be collected in 2018 and 2019 regardless of an election. A successful referendum would repeal the hospital tax just for 87 days in 2017 as well as the 1.5% insurance tax.
September 6, 2017

Oregon would forfeit federal dollars if an election is held over a suite of healthcare taxes that fund the state Medicaid system even if the taxes are upheld, according to Sen. Richard Devlin, D-Tualatin, chairman of the Committee on Ways & Means.

Devlin told reporters that an election alone would force the state to delay collecting taxes from hospitals and insurers until Feb. 22 if Republican opponents succeed in collecting enough signatures to put sections of House Bill 2391 before the voters. “It will be a loss of several months of tax revenue,” said Devlin, who was unsure whether Oregon might be able to recoup that money retroactively if the referendum fails.

He said because the state is not allowed to kick off “categorical eligibles” -- such as disabled people and very low-income children -- it would have to assume that the people who would lose coverage would be those who received insurance through the Medicaid expansion -- for whom the state receives more federal money than the traditional Medicaid population.

“You cannot cut the categorical population,” Devlin told reporters. “You could cut addictions services, but that would be counter productive. You could cut community mental health, but that would also be counter productive.”

The limbo caused by the referendum would force state accountants to retrench and apply the dwindling available funds toward only the traditional group, Devlin said. The signature drive is being led by Rep. Julie Parrish, R-West Linn and Rep. Cedric Hayden, R-Cottage Grove. The two lost the battle over the taxes in the Legislature and now are attempting to circumvent that vote with a direct appeal to the electorate.

Devlin made his comments after a hearing on the potential ballot title for a Jan. 23, 2018, election. The hearing drew a sizable crowd of healthcare lobbyists, union leaders and universal healthcare activists. Only opponents of the referendum testified.

“We should be upfront about the real effects of this referendum and the lives that are at stake,” said Vanetta Abdellatif, board chair of the Northwest Health Foundation.

If the tax referendum is successful and no new funding deal is reached in February, 300,000 people on Medicaid could lose their insurance and 220,000 in the individual health insurance market would see their premiums rise by $25 a month. At the same time, people in the Oregon group markets would have their premiums lowered by $5 a month.

If the petition drive is unsuccessful, a 1.5 percent insurance assessment will take effect on Jan. 1 and an additional 0.7 percent hospital assessment will take effect on Oct. 6.

Because of an apparent bungle by the tax opponents, the hospital tax will take effect on Jan. 1, regardless of the result of the special election. Legislative attorney Dexter Johnson said the opponents have asked for a repeal of a section of HB 2391 that applies to 2017 taxes, but failed to include the section that applies to taxes in 2018 and 2019.

Parrish refuted Devlin’s claim, saying the Oregon Health Authority has a year’s worth of reserves to draw on to pay for the Oregon Health Plan. She also said she would try to sue the state if it tried to collect taxes in January before the election.

“Dexter’s opinion is from an untested legal theory,” Parrish told The Lund Report.

Parrish declined a chance to testify at the hearing but submitted five pages of testimony, criticizing the ballot title and the slate of taxes. She also complained that the Democratic Legislature used the money not only to maintain funding for the Oregon Health Plan -- but to extend healthcare for poor unauthorized immigrant children and young mothers in two separate pieces of legislation -- Senate Bill 558 and House Bill 3391.

HB 3391 also set aside $500,000 for abortions for these immigrant women, but the bulk of the money, about $9 million, will go to provide postpartum care and contraception. SB 558 gave healthcare to 18,000 children who were ineligible for Medicaid because of their immigration status.

“In fact, the petitioners of Referendum 301 are of the belief that because taxes raised in House Bill 2391 are  fungible to the General Fund, surplus funds caused by the collection of these taxes will be used to help pay for bills like House Bill 3391 and Senate Bill 558,” Parrish wrote.

Chris can be reached at [email protected].