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Lawmakers again try softening Oregon’s health care cost controls

Unions and hospitals agree labor costs should not count toward the state spending growth cap, but critics are concerned about the new bill
The Capitol Building in Salem. | JAKE THOMAS/THE LUND REPORT
May 2, 2023

Oregon lawmakers are narrowing legislation that would weaken a state program aimed at restraining the escalating cost of health care, but critics say the bill still goes too far. 

For more than a decade, efforts to control costs have been a signature element of health care in Oregon. More than a decade ago, to national acclaim, lawmakers adopted reforms to the Medicaid-funded Oregon Health Plan to keep overall costs from escalating more than 3.4% a year. 

In 2019 lawmakers extended that goal to commercial payers and providers as well, but sky-high inflation during the pandemic fueled calls to temper or delay the new program’s implementation. The Oregon Health Authority is scheduled in 2025 to begin putting providers who exceed the cost-growth target on performance improvement plans. Providers could begin facing penalties by 2029.

The Oregon House Behavioral Health and Health Care Committee in February considered a bill backed by Republican lawmakers and the hospital association that would have exempted workforce spending, pharmaceutical drugs and many basic services from the health care cost growth cap. 

The bill’s critics, which included SEIU and former Gov. John Kitzhaber, argued that its broad exemptions would leave the cost-growth cap toothless and expose patients to skyrocketing medical expenses. It died in committee after being pulled from a scheduled vote in April.

Now, with less than two months left in the legislative session, lawmakers are seeking to advance a narrower revision in House Bill 2045. The House Rules Committee on Thursday held a hearing on the bill and a proposed amendment that would exempt the salaries of “frontline” medical workers who make less than $200,000 annually from being calculated in Oregon’s statewide mandate.

The bill’s amendment is intended to exempt providers from penalties if they exceed the threshold as they ramp up hiring of nurses and other medical workers that lawmakers, health care interests and unions agree Oregon is sorely lacking in the wake of the pandemic. 

“We do need to invest in the workforce,” Matt Swanson, lobbyist for Service Employees International Union, told The Lund Report

Swanson said the legislation seeks to ensure hospitals won’t have to cut wages for nurses and other workers to avoid running afoul of the state’s health care spending cap. The legislation also requires health care providers to report how much they spend on employee compensation to the state.  

But Cambia Health Solutions and the Purchaser Business Group on Health (a group representing private and public employers) warned the House Rules Committee that exempting labor costs from the cost-growth target will strain other segments of the health care system that are still subject to the mandate. 

Mary Anne Cooper, Cambia Health director of public affairs and government relations, said in written testimony that the bill will mean insurers will be “liable for meeting a target that includes cost drivers that providers are not responsible for containing.”

“This will impact insurers’ ability to meet the target themselves, and result in payers and providers being held accountable for differing cost standards within the system,” she said. 

Maribeth Guarino, health care advocate for the Oregon State Public Interest Research Group, told The Lund Report that the cost-growth program already allows exceptions for extraordinary factors that include pandemics, inflation and labor shortages. 

A state advisory committee is currently drafting recommendations for regulations that’ll specify when the health authority can grant providers leeway if they exceed the target. Guarino said the regulations will provide enough flexibility while still requiring a justification for exemptions, unlike the open-ended exemption in H.B. 2045.

Correction: An earlier version of this story misstated when the Oregon Health Authority will begin issuing penalties to providers who don't meet the health care cost-growth target. We regret the error. 

“There is no accountability for this. ... Hospitals can increase their workforce costs by 20%. They can increase their workforce cost by 100%. There would be transparency, but no incentive to meet the target.”

“There is no accountability for this,” she said. “Hospitals can increase their workforce costs by 20%. They can increase their workforce cost by 100%. There would be transparency, but no incentive to meet the target.”

‘Talking about this for a long time’

SEIU, the Oregon Nurses Association, the Oregon Federation of Nurses and Health Professionals along with the hospital association announced they had reached a deal in March over a controversial nurse staffing bill. As part of the deal, the hospital association agreed to back a bill mandating minimum hospital staffing levels. The unions, in turn, announced their support for a bill creating a task force to look at solutions for hospitals’ strained capacity and another revising the state’s health care cost growth target.

Supporters of broader exemptions to the health care cost-growth target have signaled they are content with the slimmed-down H.B. 2045 that’s before the House Rules Committee. 

“Legislative changes are needed to ensure that the (cost-growth) program does not inadvertently sabotage our efforts to bolster the health care workforce and does not jeopardize access to quality care in our communities,” state Rep. Christine Goodwin, R-Canyonville Republican, told the committee on Thursday. 

Goodwin, who sponsored the earlier bill, said that hospitals’ costs of hiring full-time employees had risen 26% from pre-pandemic levels. With labor costs accounting for more than half of a typical hospital’s operating expenses, many will be on track to exceed the cost-growth target, Goodwin said. 

Sean Kolmer, the hospital association’s executive vice president for external affairs, told the committee his group supports the amendment to H.B. 2045. He said the health care workforce shortage will be an ongoing issue. 

“It was here before the pandemic,” he said. “It’s probably going to be a short-term, medium-term and long-term issue. Unfortunately, I think we’re gonna be here talking about this for a long time.”

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