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Economists ask if Oregon’s hospital price cap, birth control expansion worked as planned

Research presented at a national conference puts a microscope to two Oregon laws, offering lessons to other states
June 13, 2023

As Oregon lawmakers seek a bipartisan deal to end an impasse that has held up hundreds of bills, health care economists from across the country are discussing whether legislation already passed into law in Salem is working. 

The American Society of Health Economists is holding its annual convention this week in St. Louis, Missouri. Included in research that will be presented are papers evaluating the success of Oregon policies designed to save money on state employee hospital visits and increase contraceptive access for immigrant women lacking permanent legal status.

Researchers concluded that each of these policies largely achieved their desired results. But one paper found that Oregon hospitals initially increased prices after lawmakers approved a bill designed to cap them. The other pointed to challenges of evaluating contraception policies such as one Oregon lawmakers passed in 2017. 

The researchers’ findings offer an outside appraisal of policies that once generated disagreement among Oregon lawmakers who passed them into law. They also offer lessons to other states eying ways to slow skyrocketing health care costs and expand reproductive services after the U.S. Supreme Court struck down national abortion rights. 

Capping hospital expenses for state employees

Oregon’s law passed in 2017 to cap hospital expenses for state employees actually had the opposite effect of what was hoped at first, prompting higher bills for some services before regulators stepped in, according to the conclusions of one paper presented at the conference. 

Roz Murray, a PhD candidate at the University of Michigan, told The Lund Report the policy resulted in savings but Oregon’s experience provides a lesson for other states. 

Murray said she and other researchers who worked on the paper were drawn to Oregon’s price cap policy out of interest in understanding how to address rising hospital prices that’ve become a key driver in health care costs.

Oregon has been at the forefront of state-led efforts to control health care costs.

This article has been updated with comment from state Rep. Julie Fahey, D-Eugene.

Murray, who was scheduled to present the paper on Monday at the conference, said states are increasingly taking action to rein in health care costs as federal government action seems unlikely. Oregon has been at the forefront of state-led efforts to control health care costs, she said. 

The paper she and other researchers produced focused on Oregon’s policy that capped state employee health plans spending on hospital services to 200% of what Medicare would pay. The policy is the product of a 2017 bill that went into effect in 2019 and only applied to urban hospitals. For out-of-network hospitals, it included a lower cap of 185% of what Medicare would pay.

Proponents, which included then-Senate President Peter Courtney and House Speaker Tina Kotek, argued that the state should use its bargaining power to demand better prices from hospitals. Business groups, meanwhile, opposed the measure out of concerns hospitals would shift costs on to private employers. The paper noted that recent academic literature has found that “hospital responses to restrained Medicare payment updates suggests that hospitals have responded primarily by reducing their costs, rather than cost shifting.”

Murray said the paper used claims data from 2014 through 2021 to compare state health plan spending  on hospital services to the rest of the commercial market before and after the price cap went into effect.  

Public employees account for about 15% of Oregon’s commercially insured population. The paper estimates that the price cap “saved the state employee plan $107.5 million over the first 27 months of the program.”

“I think it clearly did generate savings for the state,” said Murray of the price cap. “There’s a win, right? (The state’s) not paying as much for services as they had prior because they were able to institute this cap and take some of this negotiating leverage away from hospitals.”

But a closer look at the paper’s findings reveals a more complicated picture. 

Overall, “the cap was not significantly associated with a reduction in inpatient facility prices” for the entire time it’s been in place, the paper concluded. 

Instead of lowering prices, the cap initially prompted hospitals to increase prices on state employees receiving inpatient services. Murray said hospitals used the ambiguity to increase prices for services that were below the cap to generate more revenue, which she called a “major unintended consequence.”

Murray said the state did start to see savings on inpatient admissions in the second year after regulators clarified the law’s ambiguity in December 2020. 

The average price for an inpatient hospital admission before Oregon’s price cap policy went into effect in 2019 was $28,738, according to the paper. In the second year the policy was in effect the state saw a $2,774 savings for each inpatient hospital admission.

The average price for an inpatient hospital admission before Oregon’s price cap policy went into effect in 2019 was $28,738, according to the paper. In the second year the policy was in effect the state saw a $2,774 savings for each inpatient hospital admission.

Other states looking to implement a similar policy should be sure there’s no ambiguity in its wording, she said.  

However, the price cap resulted in “significant reductions” for the cost of outpatient procedures, such as office visits, immunizations and other services, according to the paper. The mean price for an outpatient hospital procedure was $504 before Oregon’s price cap went into effect. That figure decreased by $130 when the cap went into effect. 

“There’s significant savings on the outpatient side, and it clearly works,” said Murray. 

But she said that’s because hospitals priced outpatient services were already “significantly above the cap” before it went into effect. 

Murray said the paper’s numbers are still being adjusted and it’s currently going through a peer-review process to be published in an academic journal. 

‘A really tricky outcome to look at’ 

More research that will be presented at the conference found that an Oregon law has made contraceptives more available to immigrant women lacking permanent legal status. But the research raises questions about whether Oregon’s policy is meeting this group’s specific needs.

“Contraception is a really tricky outcome to look at because, unlike a lot of other health services, it’s not always good or always bad,” Maria Steenland, research assistant professor of population studies at Brown University who’ll present the research, told The Lund Report. 

The U.S. struggles with a high number of pregnancy-related deaths and a majority of states have expanded Medicaid coverage to women after they give birth. 

Amid these efforts to expand coverage, Steenland there’s been relatively little focus on immigrant women lacking permanent legal status who’ve been left out of these Medicaid expansions. 

In 2017, Oregon lawmakers passed the Reproductive Health Equity Act, a bill that required insurers to cover reproductive health services. The following year, Oregon expanded postpartum health coverage for immigrant women lacking permanent legal status as part of the new law.

"In Oregon, we believe that everyone should have the right to decide if and when they have children based on what’s best for themselves and their families — no matter your zip code, income or immigration status," state Rep. Julie  Fahey, a Eugene Democrat and sponsor of the bill, told The Lund Report in a statement. "So, I’m glad to see that the policy we passed years ago worked – more people started using more effective forms of contraception when it was covered at no out-of-pocket cost."

Fahey said the Legislature still has work to do to ensure access to reproductive health care and should pass  Reproductive Health & Access to Care Bill, controversial legislation that one of the bills that caused the Republican Senate walkout. 

Steenland used data from a national survey tracking women’s experiences after giving birth to see how this new law affected the contraceptive use of immigrant women lacking permanent legal status. She used the data to compare the contraceptive use of 533 immigrant women lacking permanent legal status postpartum in Oregon to roughly 3,500 similar women in 13 other states. 

Steenland said the central conclusion from the research, which she said is preliminary and hasn’t been published yet, is that this group of women increased their contraceptive use, particularly when it came to more effective and higher-cost methods.

Oregon’s policy resulted in a 10 percentage point increase in this group of women’s use of contraceptive methods that require a prescription.

The results found that Oregon’s policy resulted in a 10 percentage point increase in this group of women’s use of contraceptive methods that require a prescription. Steenland said more effective methods include birth control pills, the ring, the patch and others. 

Additionally, Oregon’s policy increased their use of “highly effective postpartum contraceptive” methods by 18 percentage points. Steenland said these methods, which overlap with those requiring a prescription, provide more long-term birth control and include intrauterine devices, implants or surgery to close a woman’s fallopian tubes.

“We think that the reason that those methods would increase more than others is because they are more expensive to pay for out of pocket if you don’t have insurance,” she said. 

But Steenland said determining whether the policy worked isn’t straightforward. In contrast, she said evaluating policies intended to boost, say, vaccinations is easier because vaccines are considered beneficial and anything that increases their use is viewed as a success.   

Similarly, researchers have traditionally viewed policies that increase the use of contraceptives as having “good outcomes,” she said. Steenland’s research instead views a good outcome as one where women get the specific form of contraception they want. However, her research doesn’t address that. 

“Is their desire being better matched by what is actually happening to them after the policy (is enacted)?” said Steenland. “It is probably necessary to actually have a patient-reported outcome or survey data where you’re actually talking to people, at least to supplement the information that you have on just use or not use.”

Steenland said the research definitely shows that for women lacking permanent legal status the cost of some methods of birth control is a barrier. She said that Planned Parenthood, or other safety net providers, offer more expensive contraceptives at a reduced price for uninsured patients, but they still come with out-of-pocket costs for uninsured patients. 

For example, she said intrauterine devices or implants are highly effective contraceptives that cost around $1,000 or $2,000. Safety net health care providers offer these contraceptives on a sliding scale or at a reduced cost based on the patient’s income. But that would still cost an insured patient a few hundred dollars. 

You can reach Jake Thomas at [email protected] or via Twitter @jakethomas2009.