Oregon developing comprehensive health system reform

Oregon lawmakers are considering a package of bills that would cover tens of thousands more residents, draw an additional $1 billion in federal Medicaid funding and turn over control of the state's health system to a citizen-led health care authority.

But the coverage expansion depends on a controversial proposed tax increase on hospitals and health plans that would raise more than $300 million a year to draw the federal funding. The proposal allows the expansion of public health plans to cover 80,000 children and 100,000 adults.

The legislative package is based on recommendations from the Oregon Health Fund Board, a seven-member citizen's panel the Legislature created in 2007. The board in November 2008 called for a nonpartisan, citizen-led health care authority to refocus the state's health system on equitable, cost-effective, preventive care and craft a plan to cover all Oregonians by 2015. More than 600,000 residents are uninsured.

The health authority would take over the responsibilities of various state health agencies and would resemble the Kansas Health Policy Authority, said Carol Robinson, the Oregon Health Fund Board's interim executive director. The Kansas authority in 2005 took charge of the state's Medicaid program and Children's Health Insurance Program. But it also coordinates state health care purchasing and compiles and distributes health care data. "We think the authority is really the keystone to doing this right," Robinson said.

Lawmakers have introduced other legislation this spring -- also based on the board's recommendations -- that would:

• Charge the health authority with establishing a health insurance exchange to provide more affordable coverage options.
• Set standards for medical homes, including focusing on preventive and coordinated care.
• Create a database of claims to compare health care costs and assess care effectiveness.
• Further develop evidence-based care guidelines in cooperation with the private sector.

Political observers said they expect the Legislature to adopt some sort of major reform legislation by the summer. "Something will happen," said Oregon Medical Assn. President Peter Bernardo, MD. The Oregon House is considering most of the changes in two comprehensive reform bills. The Senate is looking at several similar measures independently. Committees were debating the bills at this article's deadline.

The Oregon Medical Assn. has supported the reform process, but Dr. Bernardo said the society is concerned about the scope, power and expertise of the proposed health care authority. "All of us are worried that it will be a huge government organization that will have the ability to mandate care."

The OMA, however, supports the coverage expansion to an additional 80,000 children and the approximately 100,000 adults in Oregon with incomes at or below the federal poverty level. The association is wary of provider taxes, Dr. Bernardo said, but it supports finding a way to leverage the $1 billion in available federal Medicaid funding.

The proposed tax would swallow hospitals' profit margins, said Kevin Earls, vice president of policy and advocacy for the Oregon Assn. of Hospitals and Health Systems, which represents the 78 hospitals in the state. Bills under consideration would increase the existing tax on hospital revenues for the state's 26 more urban hospitals, raising it to 4% from less than 1%. But Oregon hospitals had an average profit margin of only 3.8% in 2008, Earls said. "It taxes hospitals to the point of having financial losses." The measure also would levy a 1.5% tax on health plans' gross premiums.

The hospital association joined with health plans in March to offer an alternate proposal to maintain the existing hospital tax, set to expire Oct. 1, and institute a 1% tax on medical and dental claims, Earls said. This tax would affect all health plans, including the 40% of plans that are self-funded and do not charge premiums. It would raise $215 million a year, enough to cover 60,000 children and 45,000 low-income adults, he said.

Democrats have the two-thirds majorities in both chambers needed to adopt new taxes, plus the support of the governor's office, said Republican Rep. Ron Maurer, the vice chair on the House Health Care Committee. Maurer's highest priority is an amendment subjecting the tax increases to a statewide referendum. "I'm not convinced that voters are willing to change our health care system if it includes a bunch of new taxes." He added that health system reform needs to ensure that health care consumers better understand the cost of the services they use.