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Pre-pandemic health care spending exceeded Oregon’s goal, says report

As officials and providers prepare for health spending caps, a new report shows what’s driving the cost increases that are hitting households hard
May 4, 2023

As lawmakers debate changes to a new state program intended to rein in the cost of health care, a report shows spending growth exceeded the program’s cap in the year before the pandemic hit.

According to the new report, spending on health care jumped 3.6% between 2018 and 2019, slightly over the state-set cap of 3.4%. Then, as the pandemic led to lockdowns and a decrease in visits to doctors for routine care, spending dropped 1.2% between 2019 and 2020.

The report noted that spending on health care amounted to 23% percent of all spending for Oregon households in 2020, and cited a national poll in which 38% of adults last year reported that money concerns led them to delay care.

The 72-page report the Oregon Health Authority released Tuesday  provides additional context for the rollout of the program lawmakers adopted in 2019 to slow escalating health care costs. State health officials will begin holding providers accountable for meeting the 3.4%-per-year growth target next year and could impose penalties by 2029.

Lawmakers are debating possible changes to the program after the pandemic sparked sky-high increases in labor costs, with critics saying the changes in a bill now advancing in the Legislature would excessively weaken the program.

Households feel the pinch

The report highlights the strain of costly medical care to Oregonians while offering clues on stumbling blocks to meeting the target. 

Per-person health care spending in Oregon rose 3.6% from $8,239 in 2018 to $8,539 in 2019, according to the report. That number dropped 1.2% to $8,437 in 2020 as the coronavirus pandemic caused fewer people to seek care.

According to the report, spending on Medicare, a federal program for seniors, was the only category that met the state’s spending-growth target the year before the pandemic hit. Per-person Medicare spending increased 3.3% from 2018 to 2019 before decreasing 5% in the pandemic. Spending for the Medicaid-funded Oregon Health Plan, the state’s low-income health insurance program, increased 3.5% from 2018 to 2019 before decreasing 6.3% in 2020. 

The commercial market saw higher spending; it increased 4.5% between 2018 and 2019 and declined by only 1.6% in 2020. 

Oregon lawmakers first adopted the 3.4% cost-growth target for the Medicaid-funded Oregon Health Plan more than a decade ago. The target was part of reforms designed to transform spending on the low-income health program toward improved outcomes for patients at a lower cost. 

While per-person spending on Medicaid was just above the target, the report describes how the state still spent more money overall on the program. Total health care spending on Medicaid spending rose 6% to $5 billion in 2019, according to the report. As Medicaid eligibility increased in 2020 because of emergency pandemic measures, total spending on the program soared 15% to $5.85 billion, according to the report. 

Additionally, the state granted a 5% rate increase to Oregon’s coordinated care organizations, regional insurers contracted to carry out services to Oregon Health Plan members, in 2019 and a 8% hike in 2020.

Those rate hikes reflect estimates based on previous years’ spending. But State Sen. Cedric Hayden, a Fall Creek Republican and vice-chair of the Senate Health Care Committee, told The Lund Report that he’s puzzled how the health authority can report a 3.5% increase in per-person spending on Medicaid when coordinated care organizations received larger rate increases. 

“It just doesn’t correlate,” he said. 

Increased costs, other drivers

The report referenced federal data showing Oregonians saw a 5.7% increase in personal costs on health care between 2018 and 2019, compared to 4.8% nationally. Health care and insurance accounted for nearly a quarter of all household spending of Oregonians in 2020, according to the report. 

“There is no doubt that people in Oregon continue to suffer under the weight of medical bills — and, frankly, avoid care at their own peril — because of the price tag that comes with a hospital or doctor visit.”

“There is no doubt that people in Oregon continue to suffer under the weight of medical bills — and, frankly, avoid care at their own peril — because of the price tag that comes with a hospital or doctor visit,” Kirsten Isaacson, research director for Service Employees International Union Local 49, told The Lund Report in a statement. 

She called the report “a small” but “critical” step for the state to get a handle on rising health care costs. 

The report also highlighted the biggest cost drivers to Oregon’s health care system during this time period. 

Insurers, in interviews with state staff working on the report, cited high payments to hospitals, particularly inpatient care, as being cost drivers, as well as expenses for prescription drugs and behavioral health. 

“Efforts to expand and improve behavioral health access, including behavioral health integration, as well as a Medicare 2020 behavioral health rate increase all contributed to increased behavioral health spending,” reads the report. 

Spending on hospital inpatient and outpatient services saw the most growth between 2018 and 2019 at nearly 8%, followed by retail pharmacy at nearly 7%. 

While spending in 2020 dropped for every service, retail pharmacy saw a nearly 3% increase. 

State Sen. Deb Patterson, a Salem Democrat who chairs the Senate Health Care Committee, told The Lund Report she was struck by how the report barely mentions “equity,” a goal state leaders frequently mentioned. The report contains a paragraph describing how providers expressed concern to health authority staff that providing care to “higher-cost, but vulnerable populations” could affect their cost growth. 

“That’s a red flag,” said Patterson. “We need to look at equity.”

Patterson said it’s also notable how the report shows which parts of the health care system the pandemic affected. 

She pointed to how the report shows that spending on long-term care grew less than 1% in 2019 and dropped nearly 20% during the pandemic (more than any category). She also pointed out how nearly 20% of primary care providers had to take out personal bank loans or tap savings to stay afloat during the pandemic. She also called out the report’s finding that hospitals saw higher costs despite seeing a drop in use. 

State Rep. Christine Goodwin, a Canyonville Republican and vice-chair of a key health care panel, told The Lund Report that the report is a reminder of how disruptive the pandemic was to the state’s health care system.

Goodwin has supported legislation creating exemptions to the cost-growth target. She said it’s unfair to hold providers to the target when they are still dealing with inflation, labor shortages and other pandemic-induced forces outside of their control. 

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