Medicaid funding bill easily passes Oregon House

A bill that would raise billions in federal dollars for Oregon’s Medicaid program and allocate a substantial portion back to hospitals passed in the Oregon House of Representatives on Thursday. It now advances to the Senate.

It passed 40-15, with six Republicans voting to approve the bill along with the Democratic majority. Fifteen Republicans, including Minority Leader Christine Drazan, voted against it.

The bill, HB 2010, extends a pair of taxes through 2032.

The taxes are a 2% assessment on health insurance plans and managed care organizations and a 6% assessment on hospitals’ net revenue.

The taxes provide about a quarter of the total funding for the Oregon Health Plan, the state’s Medicaid program that pays for health care for people living near the poverty line. That’s due to a federal match the state can take advantage of in funding Medicaid, roughly $3 for every state dollar invested in the program. Every state uses some form of provider tax to finance Medicaid, except Alaska.

Without legislative action both will sunset in the next two years, leaving a giant hole in the state’s budget. If that happens, Oregon lawmakers would need to reallocate about $1.13 billion in general fund revenue to continue funding the Medicaid program at its current level in the 2025-2027 biennium, according to the state’s nonpartisan legislative fiscal office.

In that scenario, hospitals would also lose hundreds of millions in extra payments they receive for caring for Medicaid patients, which are linked to the tax and its federal match.

The program is designed so that, collectively, hospitals recoup the full amount they pay into the tax.

The tax on health insurance plans is, more or less, what most people think of as a tax. It applies to employer-sponsored insurance coverage, and is passed on to Oregonians and businesses in the form of higher premiums. Some of the money raised from the tax on insurance is invested in a program that helps health insurers pay unusually expensive claims. The rest goes to funding Medicaid.

In casting their votes, Democrats said it was crucial to continue the tax and Oregon’s commitment to Medicaid. Under Democratic leadership, the state has expanded eligibility for the program and extended coverage to undocumented immigrants.

The program now covers roughly one-third of Oregonians and more than half of children in the state.

“It is a lifeline for families who otherwise wouldn’t be able to afford essential medical care,” said Rep. Rob Nosse, D-Portland. “That means access to checkups, vaccinations, dental care, and critical treatments that keep kids healthy and in school.”

Republicans who voted against the bill didn’t raise concerns about the bill itself, but objected to the process. They argued the bill should have triggered the state requirement that a supermajority approve any measures that raise taxes.

In the end, the “yes” votes for the bill passed by a supermajority anyway. Republican Reps. Ed Diehl, R-Scio, Cyrus Javadi, R-Tillamook, Rick Lewis, R-Silverton, Kevin Mannix, R-Salem, Mark Owens, R-Crane, and Kim Wallan, R-Medford, joined Democrats in passing it.

The extension on the provider tax is backed by the Hospital Association of Oregon and is a top priority for the governor and the Democratic leadership in the Legislature.

Many insurers that pay the tax have also endorsed extending it, including Regence BlueCross, Moda Health, Cambia Health Solutions and PacificSource.

In written testimony, Mary Anne Cooper, director of government relations for Cambia, expressed support for the bill but warned against any future effort to increase the rate insurers pay.

“The state needs to be careful in ensuring that the premium assessment rate strikes the correct balance between improving Medicaid funding while not exacerbating affordability challenges for Oregonians,” she wrote. “Renewal of the assessment at the current rates strikes the right balance.”

The state is grappling with a growing Medicaid population and declines in other revenues, like the tobacco tax, that help fund the program.

Meanwhile, a federal budget blueprint passed this week on a party-line vote by Republicans in the U.S. House of Representatives would require major cuts to federal spending on the health care program over the next decade.