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Oregon Health Authority Could Face Deep Cuts To Behavioral Health, Medicaid 

The Oregon Health Authority in Salem. | OREGON HEALTH AUTHORITY
May 11, 2020

The Oregon Health Authority may freeze new behavioral health programs, remove nearly one-quarter of the beds from Oregon State Hospital and pare back Medicaid services, even as the state reels from the pandemic with thousands of laid-off Oregonians applying for free health coverage under the Oregon Health Plan.

The authority leaves nothing unscathed in its proposal to reduce its spending for the rest of the two-year budget cycle, which ends June 30, 2021. The proposal follows an order by Gov. Kate Brown to all state agencies to recommend budget cuts. The authority suggested trimming $226 million in state general fund dollars. But its total budget cuts would surpass $370 million when factoring in federal matching funds, mostly from the Oregon Health Plan, the state’s version of Medicaid.

Amid plummeting state revenues caused by the state shutdown, Brown called for an 8.5% cut from the two-year budget. In practical terms, that is a 17% reduction because Oregon is already nearly half-way through the budget cycle. 

The proposals are just a starting point. Brown will get a state revenue forecast on May 20, and the outlook is bleak. Oregon faces a possible $3 billion loss in revenues, Brown said in a statement on Monday.

“We haven’t made any final decisions, and the agency plans serve as important information gathering at this point,” Brown said. “We know a potential cut of this magnitude would be extremely drastic.”

Oregon reflects a nationwide trend. States face a decline in revenues after residents sheltered in place, businesses closed down and sports stadiums sat empty.

More federal aid could change the outlook. But that is not guaranteed. Brown signed a letter Monday as part of a Western states pact with California, Washington, Nevada and Colorado. The pact is asking for $1 trillion to offset losses to state and local government agencies to help with public health care, public safety and education. Oregon’s share is unclear.

The Oregon Health Authority’s cuts would set back the state’s ongoing efforts to reform its mental health system and ensure that all Oregonians who need it have access to Medicaid less than a decade after the safety net program expanded under then-Gov. John Kitzhaber. 

Oregon Health Authority Director Patrick Allen sent out a memo to state employees Monday with a summary of the proposal. “While the governor’s office has said reductions of this magnitude are a last resort, these cuts would have a devastating impact on our health care system and the people we serve, if Oregon were forced to implement them,” Allen wrote in the memo, obtained by The Lund Report. 

The Oregon State Hospital would serve fewer people. Its 704-bed capacity would drop to just 531 beds. The mental health hospital has residents who receive treatment so they can stand trial in criminal cases, people who are civilly committed and people found guilty except for insanity in criminal cases. The hospital would face an overall $42 million cut. Earlier this year during the short session, the Oregon Health Authority had proposed boosting the hospital’s budget by 16% and pumping more than $81 million into hospital expenses and expanded services at its Junction City campus.
The authority would cut $69 million from its behavioral health funding and delay the implementation of increased reimbursement for behavioral health increases. 

The authority would cut Medicaid by $64 million under its proposal. But the program would lose $233 million because of the lost federal match. Allen’s memo says this would impact providers, coordinated care organizations and access to care.

The proposal also calls for the authority to cut $26 million in administrative costs by holding positions vacant, cutting travel and trimming supply budgets agency-wide. The authority would lose $41 million total because of federal matching dollars.

Authority Behavioral Health Director Steve Allen and Dolly Matteucci, superintendent of Oregon State Hospital, gave a presentation to the behavioral health community on Monday. 

“Frankly, I’ve been dreading this moment and having this conversation with you all,” Allen said. 

Allen said he didn’t have information about how the proposal would impact individual members of the Oregon Health Plan. However, Allen said demand is growing and state officials expect more people to apply after losing their jobs and health insurance.

The Oregon Health Plan added 19,000 new members in the first several weeks of April and 23,000 members in March. That pushed the membership of the Oregon Health Plan to 1,016,000 in late April.

The Medicaid system doesn’t have a lot of slack, so when the state budget goes down, services have to be reduced, said Jeff Luck, an associate professor of health management and policy at Oregon State University, in an interview.

"Paying providers lower rates at the same time as the COVID-19 crisis is reducing their office volume and elective surgery and procedure volume is just a double whammy,” he said. 

The behavioral health cuts would hit community programs for children, including school-based mental health and behavioral health treatment service, suicide prevention services, and in-home behavioral health treatment and crisis services. Lawmakers put those programs in place in 2019.

The proposal would roll back rate increases for behavioral and addiction providers intended to bolster the state’s workforce and reduce the authority’s ability to provide rental assistance to people with serious mental illness. The state also would cut funding to other programs, like county-based services and transition services for people preparing to exit or enter psychiatric hospitals. 

Matteucci said the hospital’s patients would likely face an increase in length of stays and readmissions because of cuts to services. She also said a workforce reduction would happen if the plan went into effect without changes. She didn’t offer any numbers.

Details of the state hospital cut are unclear, such as the specifics for different types of patients.

The hospital has not “fully vetted” what that might look like, Matteucci said. 

Cherryl Ramirez, executive director of the Oregon Association of Community Mental Health Programs, listened to the presentation. She said the proposed cuts are concerning and hopes federal funding will help the situation. 

“The cuts are just so deep and I don’t think any of our community members would be left unscathed,” she said.

You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.