State spending on the Oregon Health Plan will increase by $275 million in the coming year to cover rising medical care costs and additional services, to $6.7 billion, according to a new state document.
The finalized plan for paying regional insurers who cover OHP members features a 4.2% average increase, which the state says complies with the new per-capita spending cap the state is imposing on providers and insurers statewide to dampen the steep rise in the cost of medical care.
The federal government is expected to cover $214 million of the 2022 increase for OHP, with the rest — $61 million — coming from state funds, according to the analysis provided for the state by Arizona-based consultant Optumas.
The per-member rates the state pays Medicaid insurers to cover OHP members will average $5,820 per member per year in 2022, up from this year’s average of $5,580 per year. With the payments, known as “capitation,” the state essentially buys members full health care coverage that is provided free of charge.
The rise comprises a 3.4% increase to cover rising costs charged by health care providers, and a 0.8% increase to pay for additional services for OHP members struggling with drug and alcohol addictions, the state said.
The state’s system for curbing the rise in health care costs sets a 3.4% per-capita annual increase cap for providers and insurers, with the state allowing more under special circumstances — for example the additional care for addictions.
The state has already budgeted for its share of the rising cost, said Oregon Health Authority CFO David Baden. The federal government is expected to provide its share under its Medicaid agreement with the state.
“The 2022 base rate increase with the addition of funding for services relating to substance use disorders represents an investment by OHA, the Legislature and the governor to support our (Medicaid) members and the (insurers) that serve them,” Baden said in a written statement.
“These rates continue to meet our financial targets to keep Medicaid costs down, while helping us accomplish our vision to achieve health equity,” he said.
The Optumas analysis projects an average of 1.12 million people will be on the OHP in 2022, up from the pre-pandemic level of about 1.08 million.
During the COVID-19 pandemic, the Oregon Health Authority has temporarily stopped checking whether OHP members remain financially eligible for the program, and so no longer drops them if they exceed the income limits. Membership has surged to 1.34 million, with the increased insurance cost largely covered by the federal government under a special emergency measure that provides the extra money so long as states don’t drop members if they exceed income limits. That will change next year, when the special funding ends, and the OHA resumes checking financial eligibility and will cut about 200,000 people from the rolls.
With the release of the 2022 rates, coordinated care organizations — the state’s Medicaid insurers — now know their budgets.
Oregon’s largest CCO, Health Share of Oregon, which covers nearly 400,000 Medicaid members in the Portland metro area, said it is now figuring out how it will allocate that money for provider services.
"Health Share of Oregon is grateful that our members have a fully funded Oregon Health Plan budget, as that was not the case at the beginning of the last legislative session," said James Schroeder, CEO of Health Share of Oregon, in written comments to The Lund Report.
"While there is some increase in budget, that is partially due to new, additional benefits for this year,” he noted.
“Health Share is currently going through our CCO global budgeting process to determine how much will go into each area — physical health, behavioral health, oral health, and so on,” he said.
The per-member payments from the state vary depending on each CCO's member mix, the types of medical needs they have, and the geographic variation in medical facilities and health care costs.
For example, the average annual per member payment to Health Share of Oregon will rise 4%, to $5,568 in 2022. The average per-member payment to Eastern Oregon CCO, which covers a vast swath of rural Eastern Oregon, will rise by the same percentage, but to $6,480.
Under the plan for 2022, the total cost for the Oregon Health Plan is estimated at $6.7 billion, with $5.15 billion coming from the federal government and the balance, $1.58 billion, coming from state funds including general fund money and a tax on hospitals.
The state said the increase in services for people with addictions was approved by the federal government, effective April this year. Funding will come from federal and state sources.
Key elements include opening residential treatment facilities as well as helping to provide housing and jobs support.
The work should reduce the use of hospital emergency departments and inpatient hospital beds by people with substance abuse, the state said.
The state also expects that OHP members will increase their use of behavioral health services to address disorders partly driven by the pandemic. Per-capita per member behavioral health costs had been rising annually by 2.5%-3%, but are projected to rise to 3%-3.5% in the coming year, the state said.
You can reach Christian Wihtol at [email protected].