Oregon Senate approves renewing tax to bolster state’s Medicaid program

The Oregon Senate voted Monday to pass a bill that would secure billions in federal funding for Oregon’s Medicaid program and ensure that a significant share flows back to hospitals.

House Bill 2010 now goes to Gov. Tina Kotek’s desk to await her signature.

The bill raises and extends a pair of taxes on hospitals and health insurers, which the state uses to bolster federal funding for the Oregon Health Plan, the state’s Medicaid program that provides health care to low-income individuals and those with disabilities.

The bill also extends the state’s funding arrangement with Oregon Health & Science University that allows the university to transfer funds to the state, which can be used toward the state’s share to draw down more federal matching dollars for Medicaid.

The bill passed the Senate 22-5. Five Republican senators voted against it.

The taxes are a 2% assessment on health insurance plans and managed care organizations and a 6% assessment on hospitals’ net revenue. The taxes are expected to raise $2.1 billion to support the Oregon Health Plan, which covers 1.4 million Oregonians, including more than half of children in the state.

Like most states, Oregon’s Medicaid program is funded by a mix of state and federal funds, including the assessments on hospitals and insurance providers. The federal government funds the majority of the state’s Medicaid spending. According to Georgetown University’s Center for Children and Families, the federal government contributes $1.37 to Oregon’s Medicaid coverage for every $1 Oregon spends.

Oregon, however, particularly depends on the provider taxes to sustain its Medicaid program more than most states. About 70% of Oregon Health Plan’s funding comes from federal dollars.

The hospitals support the taxes because they unlock billions in federal matching dollars. The hospitals essentially recoup the money back in the form of larger reimbursements for the care they provide to low-income Oregonians, and it reduces the amount care provided to people without insurance that goes uncompensated.

Health insurance companies and coordinated care organizations also back the tax, though it ultimately leads to higher premiums for businesses Oregonians. That money generated from the tax is used to help insurers offset high-cost claims, and some of it goes to fund the state’s Medicaid program.

The tax on hospitals in Oregon was set to expire in September, while the tax on health insurance plans would end in 2026. HB 2010 extends the taxes through 2032.

Democrats in the Oregon Senate, who all voted in support of the bill, argued that extending these taxes were critical to continue sustaining the state’s Medicaid program.

“Without action, we risk losing billions in federal funding … and leave a significant shortfall on the state’s Medicaid system,” Sen. Mark Meek, D-Gladstone, said on the Senate floor Monday. He said that without these taxes, the state would be left with a $2 billion funding gap to support the Oregon Health Plan.

The state would have to allocate money from the general fund to support the Medicaid program, which would’ve put pressure on the state’s budget. Hospitals would also see lower reimbursements for providing care to those on Oregon Health Plan.

Republicans who voted against the bill argued that they were in support of funding Medicaid but argued that the taxing mechanism needed to be updated and improved so that certain people wouldn’t be burdened more than others.

Sen. Daniel Bonham, R-The Dalles, said the insurer tax should also apply to employer-sponsored health plans, which are federally regulated and exempt from state insurance premium taxes.

Bonham, who voted against the bill, said that gives bigger employers an advantage over smaller ones that typically get insurance coverage for their employees through the state’s small group insurance marketplace, where plans are subject to the tax. HB 2010, Bonham said, “creates a doom loop death spiral for the small group market,” as the number of people participating in those state-regulated health plans have declined and a small group of people have to shoulder these insurance premium taxes.

Meanwhile, the U.S. House of Representatives passed a budget blueprint last month that asks a federal committee responsible for federal health-care spending to find at least $880 million in savings. While the budget resolution did not specify cuts to Medicaid, a Congressional Budget Office report earlier this month found that the budget goals outlined in the budget resolution can’t be reached without cuts to Medicaid.

No one knows how much those federal cuts to Medicaid would impact Oregon and its federal funding for the Oregon Health Plan. U.S. House Republicans haven’t hammered out a plan for reaching the amount of cuts they approved.

— Kristine de Leon covers consumer health, retail, small business and data enterprise stories. Reach her at [email protected].

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