Oregon Health Care Plan Changes: Big Savings, Later?

From KTVZ.com, January 19, 2010

Gov. John Kitzhaber‘s proposed health care overhaul would save less than half of the nearly $240 million that Oregon lawmakers assumed when they wrote the state budget, projections released Tuesday showed.

John Kitzhaber

John Kitzhaber

The shortfall – $125 million under the most optimistic projection – could require reductions in Oregon Health Plan benefits or even steeper cuts in payments to doctors and hospitals. But state officials said they’re hopeful the federal government will provide an influx of money as a sort of down payment that would be recouped with future savings.

And the potential for future savings is significant. In the long run, Oregon could eventually save as much as 50 percent on health care by focusing more on preventative medicine and coordinating care, Doug Elwell, managing principal at Health Management Associates, told the Oregon Health Policy Board on Tuesday.

“It’s a tremendously exciting opportunity,” Elwell said. “I think it’s probably the best way to get to a permanently sustainable system.”

Kitzhaber hopes that the state can get a handle on rapidly rising health care costs by intensively managing chronic diseases to keep patients out of hospitals and by coordinating care between doctors, dentists and mental health providers.

The approach can allow the state to save between $58 million and $115 million from the General Fund in the first year, a net savings of 10 to 20 percent, Elwell said. In the two-year budget cycle beginning in 2013, the savings would climb to 40 to 50 percent.

Elwell acknowledged that the savings projections sound high, but he said they were conservative and realistic estimates. But he cautioned that the successful implementation will be a challenge. Historic competitors will have work together, he said, and mental and physical health providers will have to learn to cooperate.

Last year, state lawmakers balanced the two-year budget in part with an assumption that the Oregon Health Plan overhaul would save almost $240 million beginning in summer 2012. Some state lawmakers said from the beginning that they were skeptical the proposal could actually save that much money.

The Oregon Health Plan is the state’s version of Medicaid, a low-income health care program funded jointly by states and the federal government.

State officials said they’re hopeful federal money might help make up for the shortfall. Kitzhaber is in Washington this week to meet with senior health officials in the Obama administration, including Marilyn Tavenner, director of the Center for Medicare and Medicaid Services. Tavenner’s agency must waive some medical privacy and payment regulations if the proposal is to be fully implemented.

Congress contributes more than 60 percent of funding for Medicaid in Oregon, so federal coffers stand to save even more than the state’s from a successful health care overhaul. That’s the argument state officials are making to the federal government, said Mike Bonetto, Kitzhaber’s health policy adviser. He declined to say how much money the state is asking for.

“Any new federal dollars that we would be getting would be going toward transformation,” Bonetto said. “It’s not necessarily to backfill a budget hole and keep us entrenched in the status quo, and that’s the kind of thing that’s resonating at the federal level.”

If the federal government doesn’t chip in, the Legislature would probably have to reduce benefits or cut reimbursements to doctors and hospitals.

Skeptics of the health care overhaul have said it would be unworkable. The Legislature approved the concept last year, but lawmakers still must approve the more detailed implementation plan when they meet in February.

Under Kitzhaber’s proposal, community-based nonprofits called coordinated care organizations that would be responsible for patients in their region. The organization would provide community health workers to check in on patients with chronic illnesses to ensure they’re taking medications and following a doctor’s orders.

Kitzhaber aides said they’re encouraged that major health organizations in the Portland area have already started work on a coordinated care organization. The group of insurers, hospitals and three counties is trying to work out an organizational and financial structure, and organizations that have historically competed have been working together, said George Brown, Legacy Health System chief executive.

The state should ensure that privacy laws allow health care providers to share information, he said. It should allow public corporations or joint ventures to run a care organization, not just nonprofits, Brown said, pleading for flexibility.

“We have a lot of historical behaviors, stereotypes that have to be set aside because we’re not used to working with one another,” Brown said. “This requires time.”