Oregon’s hospitals are lobbying to renew a tax on themselves, and on health insurance plans, that the state uses to shore up funding for the Oregon Health Plan, the Medicaid program that pays for health care for people living near the poverty line.
FILE: An undated photo of the emergency department at Salem Health in Salem, Ore. Two taxes Oregon relies on to fund Medicaid expire in 2025. Hospitals are lobbying to extend them
Kristyna Wentz-Graff / OPB
In a press conference Wednesday, the Hospital Association of Oregon, a powerful nonprofit lobbying group that represents hospitals’ interests, said re-upping the tax is their top priority this legislative session.
The Oregon Health Plan is the single largest insurer in the state, providing coverage to 1 in 3 Oregonians and 56% of children, according to the association.
Hospitals want the tax because it allows the state to qualify for more federal funding for the Oregon Health Plan. It raises about a quarter of the total funding for Oregon’s Medicaid program, primarily by drawing down a federal match. The state gets roughly $2 dollars from the federal government for every dollar it puts into Medicaid.
A well-funded Medicaid program means hospitals get paid more for the care they provide to poor Oregonians, and spend less on unreimbursed care for the uninsured.
Oregon’s current hospital tax went into effect in 2019 and will expire September 30 this year, while the tax on health insurance plans will expire at the end of 2026.
“Without legislative action this session, we’re leaving over $2 billion on the table,” said Sean Kolmer, executive vice president of external affairs at the Hospital Association, adding that letting the taxes expire would necessitate widespread cuts to Medicaid benefits.
Taxing hospitals and other healthcare providers to fund Medicaid is common: 49 states and the District of Columbia have a provider tax. Alaska is the only state without one.
Oregon’s tax on health insurance plans to support Medicaid funding has historically been controversial. The cost of the tax has previously been passed on to school districts and employers, while some insurers are exempt from it under federal law.
This week, Democratic leaders in the legislature, Senate President Rob Wagner and House Speaker Julie Fahey said they hoped to pass the provider tax extensions in the first half of the session.
“The stated intention is to try to get everybody around the table,” Wagner said, “to get a bipartisan vote out of this.”
Republican Daniel Bonham, the senate minority leader, said that bipartisan support isn’t guaranteed.
“I don’t believe in taxing health care, as a blanket statement,” he said. “I’m struggling right now, as a member of the minority party that doesn’t feel included, to want to participate.”
Bonham added that he was concerned Democrats would try to get an early win on the provider tax “and come with hyper-partisan things late.” That’s in reference to the dynamic during the 2023 session, which began with bipartisan compromises on housing and economic development, and ended with a six-week long Republican walk-out over an abortion bill.
The hospital association is also throwing its weight behind new Medicaid spending in Gov. Tina Kotek’s proposed budget: $35 million to increase payments to hospitals for labor and births, and $25 million to increase reimbursement rates for other Medicaid services.
The association says the Oregon Health Plan pays $0.56 for every dollar of care provided to members. That’s a contributing factor, they say, to roughly one-third of the hospitals in Oregon operating in the red, even after factoring in earnings from investments.
“When the state is the largest health insurer, and it doesn’t pay providers, including hospitals, enough to cover the cost of caring for its members, it creates financial instability,” said Becky Hultberg, association president.
Maternity care, in particular, is at risk when hospitals have financial challenges. Hospitals in Oregon, and nationwide, have closed labor and delivery units as the cost of employee labor, drugs, and supplies climbed following the pandemic.
Dan Grigg, CEO of Wallowa Memorial Hospital, said it’s difficult to keep labor and delivery programs open in rural parts of the state, due to the need to have C-section trained doctors, nurses, and anesthesia providers available and on call 24-hours a day.
“The cost for these standby services are tremendous, but you can’t have a program without them,” he said.
Larger hospitals can recover more of that cost by delivering more babies, but rural areas with fewer deliveries have to subsidize the service with more profitable care.
In lean times, labor and delivery units have to be cut to keep rural hospitals solvent, Grigg said.
“That’s why it’s so important for the Oregon Health Plan to be fully funded so that we continue to serve folks in our region.”
Correction: An earlier version of this story included an inaccurate reference to Rob Wagner’s role in the Legislature. He is the Senate president. OPB regrets the error.