This article has been updated to incorporate additional reporting as well as clarification from the Oregon Health Authority .
Oregon Health Authority officials are preparing to ask lawmakers for help to cover roughly $260 million in unexpected costs using the state's General Fund.
The issue? After years of work getting low-income Oregonians enrolled in programs offering free health care, the state now has to pick up an unplanned, roughly $200 million budget tab for its higher-than-expected success rate.
Not only that, but federally mandated safety improvements and the new state nurse staffing law are driving more than $60 million in unbudgeted costs at the Oregon State Hospital, the state psychiatric institution located in Salem and Junction City.
All told, “that’s a lot,” said state Rep. Rob Nosse, a Portland Democrat, when told of the agency's funding problem.
Agency leadership did not make someone available to be interviewed Monday and Tuesday about the shortfall. Late Wednesday, after initial publication of this article, Deputy Director Dave Baden told The Lund Report that the agency is still negotiating with the state budget office over the size of its estimated shortfall.
He expects the agency's ask for lawmakers to cover the unexpected costs will be “much less” than $260 million, thanks to underspending in other parts of the agency.
He credited the agency's efforts to ensure people are covered despite the resumption of income eligibility checks in the Medicaid-funded Oregon Health Plan following the pandemic.
“I'm proud of the work that the Health Authority did ... to keep people covered,” he said. “And that has budget implications.”
Agency budget evolves
Normally, unexpected enrollment jumps are handled by the Oregon Legislature’s Joint Emergency Board, noted Nosse, who chairs the House Committee on Behavioral Health and Health Care.
But the agency’s projected request for “rebalance” funds is too big, so “there's not enough money in the emergency fund to accommodate our ask,” health authority Deputy Director Kris Kautz said at a recent internal meeting.
As a result, the agency will ask lawmakers for funds once the 2025 legislative session starts in January, she added.
Currently the state's general fund contributes about $7 billion of the agency's requested two-year, $39 billion 2025-27 budget. So the size of the budget hole is significant.
A month ago, state officials announced survey results indicating 97% of Oregonians now have health coverage, a new state record.
“Access to affordable health coverage is the cornerstone of human dignity and the chance to live a healthy life,” health authority Director Sejal Hathi said in a press release at the time. She added that thanks to the state’s “extraordinary efforts, health care for all is on the path to becoming a reality, making it possible for everyone in our communities to reach their full potential and well-being.”
Assumptions did not pan out
The unbudgeted costs of the greater-than-expected enrollment stem in part from assumptions made as the pandemic subsided.
During the COVID emergency, in keeping with federal guidance, Oregon halted eligibility checks on people who’d enrolled in the free care offered by the Oregon Health Plan, which is 70% funded by the federal Medicaid program.
As a result, the number of people covered climbed from about 1.2 million to more than 1.5 million. And when eligibility checks resumed, state officials expected more than 260,000 people to be kicked off the program because they made too much money to qualify.
That did not happen.
Instead, after eligibility checks resumed in April 2023 to ensure people met the Medicaid income caps, state officials reported one of the lowest disenrollment rates in the nation. In other words, more Oregonians met the program's low-income requirements than were expected.
Instead of enrollment dropping by more than 260,000, it has dropped by less than half of that, to 1.412 million as of Oct. 1.
Now, the unexpected costs resulting from high enrollment are “driving $200 million in general fund alone for the remainder of this biennium,” Kautz said at the recent agency meeting. “So that's a big chunk of change.”
Another potential factor in the added costs: the state paused eligibility checks for three months to retool its process in the middle of the post-pandemic Medicaid renewals. That led to caseloads coming down more slowly than expected and threw off the state's earlier enrollment projections, forecasters reported in May.
State officials expect final numbers on the Medicaid renewal process next month.
Enrollment fuels unexpected costs
In addition to the lower-than-expected disenrollment in the Oregon Health Plan, there was also growth in two smaller programs, according to state officials and documents.
The new “Bridge” health plan authorized by lawmakers offers free care to people who earn too much to qualify for the Oregon Health Plan — between $21,000 and $30,000 annually for a single adult. About 29,000, have enrolled in the Bridge plan. That's not more than was projected, so is not contributing to any overruns.
Also, 93,000 people have enrolled in Healthier Oregon, a state-funded program offering OHP-level benefits to people regardless of their immigration status. That's well over the state's projection of 55,000 enrollees.
“The good news is that we are the state leading the nation in transitioning people out of the public health emergency through the redetermination process of their Medicaid benefits, either continuation of Medicaid or on to another program, such as the (Bridge) plan,” Kautz said at the recent meeting of agency managers. “Of course, the Healthier Oregon program has also been stood up and is expanding as well.”
Meanwhile, the more than $60 million in unbudgeted costs at the Oregon State Hospital is driven largely by increased staffing, including on costly temps, to comply with federal safety orders as well as the new state nurse staffing law.
“In order to remain in compliance with multiple regulatory bodies, OSH has relied heavily on both overtime and contracted labor to meet staffing requirements. Contracted nursing services personnel are more expensive than state employees,” a spokesperson said.
Impacts unclear
The health authority’s budget crunch comes as the state has set a lower-than-expected per-person average payment to the care organizations who deliver health services to low-income people in Oregon, a change state officials attributed to “funding constraints” and a shift in the Medicaid population.
Meanwhile, state officials are preparing to discontinue a long-running cost-control program used by the Oregon Health Plan, sparking concerns among the contractors who oversee coverage.
Internally, OHA has told managers they need to cut down on contracting expenses in light of the agency’s financial situation. Managers also need to hire fewer employees for positions that have not been authorized by the Oregon Legislature, such as with temps and limited-duration employees.
Nosse, the lawmaker, said “when you have a state that tries really hard to keep people having health care, maybe we shouldn’t be surprised that there are costs.”
But from a purely fiscal standpoint, the news is “not good,” Nosse added, because “we have to find that money. And we will somehow, but...”
It's also unclear whether the agency's requested budget will need adjusting. State offiicals plan to brief lawmakers at a public hearing in December.
