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Debate puts Oregon Health Plan taxes in peril

"As someone who has been around since the beginning, the health plan we once knew is, in fact, no more," Fiskum said. "What needs to happen is a discussion about health care reform in Oregon."

Debate puts health plan taxes in peril

A dispute over how the new money should be spent could prevent federal approval at a time when the plan is struggling



New health care taxes that lawmakers approved last year could bring in more than $60 million in the next two years to help patch holes in the Oregon Health Plan left by the defeat of Measure 30.

Hospital and managed-care officials went along with the new taxes on their businesses because they were promised the money would pay for a hospital insurance benefit for the working poor.

But disagreement about how to spend the money threatens federal approval of the new taxes at a time when Oregon's 10-year-old experiment with health insurance for the poor is struggling to survive.

Some say the hospital compromise was a good deal at the time, but it now makes little sense to provide people expensive hospital coverage if they lose all the rest of their health insurance.

That's because the governor, lawmakers and health care advocates want to protect the most basic health plan programs for low-income Oregonians, such as:

Services to children and pregnant women.

Primary medical care for adults.

Prescription drug benefits for senior citizens and people with disabilities.

Even if federal regulators approve the new taxes, they won't buy back all the services jeopardized by the defeat of Measure 30.

Rep. Alan Bates, D-Ashland, the only physician in the Legislature, says there are no good choices for lawmakers faced with deciding between children in poverty and adults with severe mental illnesses.

"It's a huge debate with a huge number of trade-offs," Bates said. "The debate is raging right now."

The health plan, introduced in 1994, offers two benefit packages. About 300,000 Oregonians are enrolled in the full package, offered at little or no cost to children, pregnant women and the disabled. The second package, serving fewer than 50,000 people, offers a more limited benefit to adults, who pay a premium.

The boundaries of the debate are hazy.

After Measure 30 went down earlier this month, the state Department of Human Services estimated the health plan faced a shortfall of $110 million after various internal savings were taken into account. But that number is in flux, officials say.

The agency will present a new budget plan to the Legislative Emergency Board in April.

Other sources face obstacles

There are other potential sources of money that could prop up the health plan. But they have political problems of their own. For example, Human Services director Jean Thorne proposed using $18 million intended for popular senior programs. The Legislature could reinstate the 10-cent-a-pack cigarette tax that Measure 30 would have continued, raising $24 million.

But that would require a special session, a three-fifths vote in both chambers and probably a referral to the people. In the wake of the drubbing voters gave Measure 30, lawmakers may not have much enthusiasm for any tax increases.

The provider taxes have this advantage: The Legislature has approved them.

During the 2003 session, the Legislature passed House Bill 2747, which imposed taxes on hospitals and managed health care plans. It also imposed nursing home taxes, but none of that money would be available for the health plan.

The goal of the taxes is to generate a federal Medicaid match of $6 for every $4 raised. The Legislative Fiscal Office estimates it raises enough to pay back the hospitals and health care plans, and generate $63 million for the health plan.

The hospital industry, initially reluctant, eventually agreed to the taxes as a way to pay for an adult hospital benefit that was on the legislative chopping block.

They are sticking to their guns, although Gov. Ted Kulongoski has proposed dropping the working adults from the plan.

"What we told them is, a deal is a deal," said Ken Rutledge, director of the Oregon Association of Hospitals and Health Systems.

Rutledge said a hospital benefit becomes more critical if adults are dropped from the plan because they will end up in emergency rooms where hospitals have to provide treatment. That cost would ultimately end up in higher private insurance rates, he said.

The governor is still open to discussion, he said. "But if they decide to take the money and use it elsewhere, we'll do everything we can to stop the tax on hospitals."

That could mean litigation. But Rutledge said disagreement at the state level could be enough to prompt federal Medicaid officials to reject the taxes. Federal officials are becoming increasingly skeptical about state schemes to use such provider taxes as a way to shift their share of the cost to the federal government.

"A whole new ballgame"

"The state is trying to honor the integrity of the agreements," said Erinn Kelley-Siel, the governor's policy adviser on health issues. "But we're playing a whole new ballgame."

The governor would like to honor the agreement, "It's just that we're not able to do so," Kelley-Siel said.

Kulongoski's priorities -- preserving services for children and pregnant women with incomes above the poverty line and a drug benefit for seniors and the disabled -- would cost about $65 million.

Ellen Pinney, executive director of the Oregon Health Action Campaign, a consumer group, agreed the choices are difficult, and more information is needed. But she said it may be more important to protect primary care for adults.

"If you cut those people off, they start going back into emergency rooms, psyche wards or prisons," Pinney said.

The most important thing is preserving the basic structure of the state's health care system, including managed care plans, said Sen. Ben Westlund, R-Bend, a key figure in the health plan debate.

"If that goes away, we don't get it back, it's gone," Westlund said.

Oregon will still face the broader issue of whether the health plan can -- or even should -- survive.

The plan is based on the idea of giving more people access to health insurance by limiting the benefits offered under the traditional Medicaid program. Oregon's experiment depends on a federal waiver of federal regulations that could be in jeopardy if the state cuts benefits and access.

Dave Fiskum, a lobbyist for Providence Health Systems and a veteran of the health care debate in Salem, said perhaps it is time to accept the death of the health plan and seek another solution.

"As someone who has been around since the beginning, the health plan we once knew is, in fact, no more," Fiskum said. "What needs to happen is a discussion about health care reform in Oregon."

James Mayer: 503-294-4109;  jimmayer@news.oregonian.com