Hospital Provider Tax Could Temper OHP Cuts

April 7, 2011 -- Discussions are expected to begin next week on a plan to increase the hospital provider tax as a way to reduce the proposed 19 percent reimbursement cuts to the Oregon Health Plan.

 

“We can’t tolerate those kinds of cuts,” Sen. Alan Bates (D-Ashland) told The Lund Report yesterday.

 

By increasing the hospital provider tax, the state could draw down additional federal matching dollars and keep reductions to OHP at around 12 percent, Bates said.

 

“There are lots of issues around that adjustment,” he added.

 

Two years ago, Oregon hospitals agreed to an increased provider tax as long as hospitals overall would receive enhanced Medicaid reimbursement.

 

The hospital provider tax currently generates $315 million per biennium, matched by the federal government with $819 million. That money is used to increase reimbursements to hospitals under the OHP fee-for-service plan managed by the state as well as provide the sole source of funding for the OHP Standard health plan, which now provides coverage for more than 70,000 people.

 

“I am really proud to have been a part of developing this program,” Andy Davidson, president and CEO of the Oregon Association of Hospitals and Health Systems told legislators during a hearing before the Ways and Means Subcommittee on Human Services last week.

 

In 2003 and 2004, the Oregon Health Plan lost 80,000 people due to budget cuts. As a result, hospitals experienced an up-tick in uncompensated care. With the re-establishment of OHP Standard, hospitals theoretically should be seeing less uncompensated care. But in reality, those numbers have gone up because commercial insurers have been shedding members at the same time.

 

In 2009, Oregon hospitals reportedly provided more than $1.1 billion in uncompensated care – which includes charity care and bad debt figures – a 14 percent increase from 2008. The figures from 2010 are not fully in yet, but Davidson said early projections show it could reach $1.4 billion across the state.

 

“Uncompensated care has unfortunately continued to skyrocket,” Davidson said

 

Had those 70,000 people not been insured through OHP Standard that figure would be even higher, pointed out Rep. Mitch Greenlick (D-Portland).

 

“Not only do the hospitals get paid back, they end up not seeing those people show up to the hospital without insurance,” Greenlick said.

 

Complicating matters, President Obama’s proposed federal budget suggests eliminating the federal match on all provider taxes. Similar proposals in the past, however, died in Congress.

 

Oregon also relies on provider taxes levied against managed care plans and commercial insurers, which funds coverage for 80,000 children in the Healthy Kids Program. A similar tax on long-term care facilities also funds enhanced services. And now groups representing service providers for developmentally disabled patients say they too want to enact a provider tax for their industry.

 

“We have been experiencing a continuation of their erosion of funding of developmental disability services in this state,” Brian Delashmutt, the lobbyist for the Community Provider Association of Oregon told legislators. “We’re to the point right now where we cannot survive without some additional resources. It seems like a provider tax has worked in other areas. We are willing partners in exploring that and seeing what we would do.”

 

FOR MORE INFORMATION

 

To learn more about the current hospital tax and its origins, click here.