Oregon tried to cap health care costs and the cap is cracking

The Oregon Legislature put a lid on health care costs in 2019. It set a target for the annual per person growth rate of all the health care spending in Oregon.

The cost of health care was growing faster than wages. One way to stop it, legislators believed, was to put a lid on it.

If a health care payer or provider exceeded a target with statistical certainty and without good reason, the state could implement a "performance improvement plan" on them. The payer or provider could also face financial penalties.

The lid was set at 3.4%.

Guess what happened.

In short, the lid started to come off. And now it's coming off some more.

Oregon didn't hit the target for 2018-19. Not for commercial insurance and not for Medicaid. Medicare was lower at 3.3%. But hospital outpatient costs rose by 7%. Professional services costs rose more than 5%. Retail pharmacy costs went up by more than 6%.

And then the pandemic hit. And Oregon did hit the target.

But there was concern about the lid. In 2021, the Legislature put a delay on any financial penalties until 2026.

In January, because of economic uncertainty and inflation, Oregon then put off subjecting payers and providers to performance improvement plans for a year.

And now in the Legislature, there is House Bill 2045. During the pandemic, workers at hospitals and other medical facilities faced extraordinary challenges. Some retired. Some quit. Some changed jobs. There was already an imbalance between nurses needed and nurses available.

The bottom line: It became very difficult for hospitals to hold on to employees and control costs for those employees.

What House Bill 2045 does is insert an exemption for what it defines as "front-line workers." Front-line workers are defined basically as any worker whose total compensation is less than $200,000 a year, adjusted for inflation. The costs of front-line workers would just not count in determining if a provider was meeting the growth target.

The lid may not be gone. It's been coming off. And meanwhile, wages still struggle to keep up with health care costs.