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Oregon Medicaid Faces Potential Explosion In Demand

A sign outside a Starbucks in Salem during the coronavirus pandemic. Ben Botkin/The Lund Report
April 2, 2020

Fallout from the coronavirus pandemic is likely to hit Oregon’s Medicaid program.

Tens of thousands of Oregonians who’ve been laid off with the closure of hotels, restaurants, stores and other businesses will need health care coverage. Many could turn to the state for insurance under the Oregon Health Plan, likely placing a sudden and unprecedented financial strain on the $6 billion-a-year system.

The Oregon Health Authority’s budget and caseload teams are exploring the issue, the agency told The Lund Report. But the agency didn’t release any estimates on expected jumps in enrollment and expenses.

The numbers could be modest or staggering, depending on the severity of the virus-induced layoffs, how many of the newly jobless meet the health plan’s income limits and how long they stay on the state coverage, which already insures 1 million Oregonians.

Some initial numbers suggest the Oregon Health Plan, the state’s single largest and most expensive social safety net, could face a major surge in demand.

On Thursday morning, the state announced that 92,700 people had filed for unemployment compensation in the previous week, on top of the 76,500 who applied the week before. Before the virus crisis, about 5,000 Oregonians applied for unemployment each week.

And this is just in the early days of this virus-induced economic contraction.

Oregon will lose 257,000 jobs by July through layoffs and furloughs, pushing the state’s jobless rate to 15.5 percent from its pre-virus record low of 3.3 percent, the nonpartisan nonprofit Economic Policy Institute estimated in a report released Wednesday.

Under the current OHP system, the state spends on average about $6,000 a year insuring the health of each of its members. Adding, for example, 150,000 members could cost the state an extra $900 million a year – although the federal government has already offered some extra money to help.

Free State Coverage Looks Attractive

Laid off in late March from her job as a product manager at a Portland-area software development company, Andrea Kelly, 33, said securing health insurance is now one of her priorities.

Her former employer is paying for her company-sponsored health insurance until the end of this month, but after that Kelly will need to buy her own coverage – or get on the Oregon Health Plan at no cost.

Free looks attractive, said Kelly, who has no other income to backstop her against her job loss.

“I definitely think that cost is the biggest factor I’m looking at now,” Kelly said.

Continuing her former employer’s coverage under COBRA or buying an individual commercial policy would cost her hundreds of dollars a month in premiums, and would mean she’d face co-pays, deductibles and other limitations.

By contrast, OHP is free provided members meet income limits. A single person can earn no more than $1,436 a month. A family of two can earn no more than $1,945 a month.

Most Oregonians laid off in the coronavirus economic fallout and who seek unemployment benefits will likely qualify for OHP, provided they don’t have independent income or a working spouse, said Jeff Luck, an associate professor at Oregon State University’s College of Public Health and Human Sciences. Also, some employers are furloughing workers, keeping them on company health insurance while allowing them to apply for unemployment compensation.

The likely increased demand for government-paid health insurance is just one among myriad virus-inducted economic strains.

But it’s a big-ticket issue that state officials and the insurers – coordinated care organizations, or CCOs – that manage the Oregon Health Plan in regions around the state, are scrambling to gauge.

The state pays CCOs an average of about $6,000 per member per year, which the CCOs use to cover administrative expenses and pay for the member’s doctor visits, medication, medical procedures and the like.

Many Variables At Play

The state’s biggest CCO, nonprofit HealthShare of Oregon, covers 300,000-plus members in the Portland metro area. Like many experts, HealthShare CEO James Schroeder says he’s preparing for more residents to apply for OHP, but he’s unsure how many. “There are so many variables,” he told The Lund Report.

He noted this is the first time OHP will have operated in an economic downturn since the state expanded the plan’s membership by about 25% under the Affordable Care Act in 2014.

“This is what we are here for, in the event people lose their (commercial) health insurance, we have the capacity to cover them,” Schroeder said.

How much money will be needed to do that, and where it would come from, is another matter.

Congress Approves Temporary Spending Increase

The federal government pays about 75%  of the cost of OHP, with the state covering the rest, mostly using taxes on hospitals and health insurance companies and the income-tax-fed state general fund.

Congress in March came through with temporary extra money to help states with Medicaid, which in Oregon operates as the Oregon Health Plan.

Lawmakers passed the Families First Coronavirus Response Act, which included a temporary 6.2% increase in money the federal government will pay to states for most Medicaid expenses from Jan. 1 through the end of the COVID-19 health crisis. It’s unclear how much Oregon will get under the new law, but it could be $20 million or more a month.

The OHA said it is reviewing “the potential increases to (OHP) membership against available resources,” including that new federal money.

The state health agency also said it has no reserves for operating the OHP. Altogether, the state’s 15 CCOs have reserves totaling about $390 million, according to OHA figures.

State health officials stressed it is hard to predict the financial ramifications for the Oregon Health Plan. For example, spending might be reduced in part by deferring elective or nonurgent care, the agency said. Many hospitals and care providers have already sharply scaled back non-COVID-19 care.

“The extent of (COVID-19’s) impact is not fully known and how this impacts enrollment on the Oregon Health Plan with a potential downturn in the economy,” a state spokesperson said. The agency said it is talking about the health plan’s “potential budget needs” with the governor’s office, state legislators, CCOs and health care provider groups.

More Rescue Packages May Be Needed

The state’s second-largest CCO is PacificSource, a nonprofit based in Springfield. It covers about 240,000 members in the Salem area, Lane County and central Oregon. A spokesman said the insurer anticipates more enrollees due to layoffs. “The state will definitely have some budget challenges, though it is possible that Congress could pass additional rescue packages that include funding for states to address this issue,” the spokesman said.

The crux is how many Oregonians will be laid off, lose health insurance and apply for OHP.

In the ongoing economic crisis, Oregon’s jobless rate “will go up a decent amount and probably substantially,” said Josh Lehner, an economist with the Oregon Office of Economic Analysis, but he’s not ready to offer a projection.

Sandra McDonough, CEO of the trade group Oregon Business and Industry, last month predicted Oregon’s jobless rate would soar to 20%. That would equate to 400,000 unemployed.

Pre-virus, the state had record-high employment and low-unemployment, with almost 2 million people employed and just 79,000 unemployed. At the depths of the Great Recession in May 2009, the state had 236,000 unemployed and a jobless rate of 11.9%.

Meanwhile, laid-off workers such as Kelly are trying to cope. “Everything depends on how long this is going to last,” she said.

 You can reach Christian Wihtol at [email protected].