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Medicaid Bill Coming Due, with Few Answers Outside Big Tax Measure

The Oregon Health Authority has so far dodged questions about how the state plans to cover its $328 million share of the Medicaid expansion, as the cost of providing healthcare for the poor comes due next year. The state agency promises a budget in September based on current revenues, while Democratic politicians pray for a big windfall come election day from Measure 97, the corporate tax initiative.
August 26, 2016

The Obamacare Medicaid expansion has given access to healthcare to hundreds of thousands of Oregonians, and helped the healthcare industry make millions in new profits, while greatly expanding the number of people employed in the healthcare sector.

In 2012, former Gov. John Kitzhaber and the Democratic Legislature became one of the first states to announce they’d expand Medicaid to all eligible low-income residents -- a position supported by three Republicans. They even made the Oregon Health Plan richer, expanding dental coverage to all adults.

Oregon has benefited from increased personal income tax revenues from these new healthcare jobs, but the costs associated with the Affordable Care Act will come home next year, with the state being asked to contribute a gradually increasing share of the costs, topping out at 10 percent.

The ability to pay for its share of Medicaid is a conundrum that Oregon, still recovering from a devastating recession, has yet to figure out. Most of the increased revenues from the improving the economy have gone to rescuing the state’s public schools, not set aside to cover the Medicaid bill as it comes due.

Reached by telephone, House Health Chairman Rep. Mitch Greenlick, D-Portland, said the solution to the riddle was simple: Pass Measure 97, the 2.5 percent corporate tax on sales above $25 million, which voters will consider this November.

“We’re all holding our breath to have this magical answer to all our fiscal problems,” he said.

If Measure 97 does not pass, the state has a $1.35 billion budget hole to fill, and a quarter of that, $328 million, stems from the state’s increased share of the budget for Medicaid, also known as the Oregon Health Plan, according to an analysis drawn by the Legislative Fiscal Office.

The state also must come up with $150 million due to increased caseloads and richer benefits at the Department of Human Services, particularly for low-income seniors and people with disabilities.

“It’ll be pretty hard,” he said. “It’s clearly a problem.”

Greenlick does not sit on the budget committee, but said it’s possible the state could have room to increase the hospital assessment, which the state currently uses to pay much of the state’s share of the Medicaid budget pie, and draw down more federal money. The hospital assessment currently provides 7 percent of the overall Oregon Health Plan budget, or about $1 billion. Its costs are primarily tied to the traditional Medicaid system rather than the new expansion population.

The Oregon Health Authority has been largely mum on fixing the problem, answering most questions posed by The Lund Report with the answer that they’ll have something ready for the public to digest in September -- hopefully in time for the Legislature’s informational days Sept. 21 to 23.

“We’re working hard on the budget process – our budget team is working with [the Department of Administrative Services] – we’ll have no specific details until September when we’ll deal with funding the Medicaid budget for next biennium,” said Mark Fairbanks, the OHA’s chief financial officer.

Reimbursement rates for the coordinated care organizations are being closely and thoroughly examined, he said, while the agency wouldn’t return to the 2014 budget, when CCOs were clearly paid more than their services actually cost. After the Affordable Care Act was implemented, state officials assumed medical costs would be much higher than they actually turned out to be.

“It’s safe to say that the CCOs agree that there’s constant scrutiny on their costs and the delivery of care -- the redevelopment process is underway -- it’s a very tactical and very deliberate process -- very analytical -- a lot of data-sharing and review,” Fairbanks added.

With the passing of Sen. Alan Bates, and the political departure of his fellow Ashland Democrat, Rep. Peter Buckley, the House Budget Chairman, that task will fall more firmly on the shoulders of Rep. Nancy Nathanson, D-Eugene, and the  remaining budget chairman, Sen. Richard Devlin, D-Tualatin.

Sen. Elizabeth Steiner Hayward, D-Beaverton, and Rep. Dan Rayfield, D-Corvallis, are expected to replace Bates and Nathanson as the new chairs of the subcommittee that prepares the budgets for the Department of Human Services and the Oregon Health Authority.

Earlier this summer, the Oregon Health Authority submitted a new Medicaid waiver to govern the Oregon Health Plan through 2022, but it was unclear from answers given by Fairbanks and authority spokeswoman BethAnne Darby how that would factor into their new budget.

The waiver asks that Oregon continue to receive a 3.4 percent increase in medical payments each year, as well as an additional $2 billion over five years to continue investments in hospital transformation as well as a new investment in “community health partnerships,” enabling the state to devote resources to the social determinants of health, particularly housing.

The waiver also asks that certain expenses, such as the expense of high-cost pharmaceuticals, be paid on top of that 3.4 percent allotted for other medical costs.

If approved, the $2 billion -- or $400 million annually -- will almost certainly be tied strictly to the holistic investments outlined in the proposal, and not be used to help close the state’s financial responsibility for funding the program. The waiver specifically asks for $150 million a year to continue hospital transformation and $250 million a year for the community health partnerships.