Oregon governor supports 19% Medicaid pay cut

Oregon Gov. John Kitzhaber, MD, is backing across-the-board Medicaid pay cuts to close nearly the entire remaining $735 million revenue shortfall in the state's two-year, $15 billion 2012-13 budget.

The proposal would reduce Medicaid rates by 19% in fiscal 2012, which begins July 1, and could require an additional 15% cut in fiscal 2013 if a new care coordination program fails to produce enough savings, according to estimates by the Oregon Assn. of Hospital and Health Systems.

Oregon Medicaid physician pay rates already are as low as 60% of what Medicare pays, said Betsy Boyd-Flynn, spokeswoman for the Oregon Medical Assn. These cuts "would really reduce access, and they would probably drive more physicians into retirement."

Hospital Medicaid rates cover only about 70% of costs, said Andy Van Pelt, a spokesman for the hospital association.

Some primary care doctors already limit their Medicaid participation. In 2009, 53% of all Oregon physicians accepted new Medicaid patients without restrictions, 30% limited their Medicaid load and 17% were closed to new Medicaid patients, according to a physician work force survey by the Oregon Dept. of Health Services. Unrestricted participation rates were lower for family doctors and internists.

Dr. Kitzhaber proposed the 19% Medicaid cut during his budget presentation in February. The co-chairs of a joint legislative budget committee said in March that they could reduce the proposed cut to about 10% if the state increased its hospital tax in an effort to draw more federal matching funds. Negotiations continued on the hospital tax at this article's deadline.

Neither Dr. Kitzhaber nor state lawmakers formally have proposed a secondary 15% Medicaid cut. But as budget details became available, the state hospital association calculated that such a reduction would be needed if the governor's proposal for accountable care organizations in Oregon Medicaid doesn't achieve the $250 million in savings he projects. The ACO proposal would be adopted in separate legislation.

"To balance your budget on savings from a program that doesn't exist isn't realistic," Van Pelt said.

The Medicaid rate cuts also have the potential to reduce federal matching funds just as more people will be enrolling in the program. The national health reform law's Medicaid expansion is expected to cover an additional 150,000 state residents, Van Pelt said.