Citing Financial Losses, HMOs Cut Coverage Through Oregon Health Plan
Rising financial losses will cause many HMOs to scale back or cease their business with the Oregon Health Plan, resulting in the loss of coverage of thousands of low-income or disabled individuals enrolled in the program, the Portland Oregonian reports. Begun in 1994 as a Medicaid expansion effort, the Oregon Health Plan serves about 375,000 adults and children -- 75,000 of whom would be ineligible for public coverage without the plan. Among the 15 plans with which Oregon Health Plan contracts, eight posted combined net losses of more than $11.6 million on those contracts in the first half of the year, and nine "skidded into worse financial shape" than at the end of 1999, according to the state Office of Medical Assistance Programs. Kaiser Permanente, Oregon's largest HMO, alone lost $2.5 million on its Oregon Health Plan contract last year and an additional $1.6 million in the first half of 2000, the Oregonian reports. As a result of these losses, many insurance companies have recently decided to either cancel or limit their relationships with the plan. For example, Regence BlueCross BlueShield will cease all business with the program, transferring about 48,000 enrollees to other companies' plans in the Portland and Salem area by April. Statewide, the share of Oregon Health Plan enrollees covered by an HMO dropped from a high of nearly 85% in 1998 to about 65% at the end of October. Although individuals dropped by the private plans still have Medicaid coverage, they must "search among limited numbers of doctors willing to accept Medicaid's low rate of payment," the Oregonian reports.
Physicians Also Feel the Pinch
To control spending at the program's outset, the state contracted with managed care companies, which agreed to cover services through a capitation system. Capitation reimbursements, however, "haven't kept pace with underlying costs of new technology," according to officials from physician's groups. In addition, some physician's groups that have taken over the care of low-income individuals in several counties also have suffered financial troubles this year, "undermining state officials' hopes that such groups could avoid losses that are driving commercial HMOs to abandon low-income people," the Oregonian reports.
State officials hoping to remedy the problem are facing a "difficult choice" between spending "significantly more money" on health care or reducing services. In his budget, Gov. John Kitzhaber (D) included a 20% pay increase over two years to health plans and physician's groups participating in the program. The allocation must still be approved by the state Legislature, which has approved a stopgap measure giving the organizations a 2% pay hike effective in December. Hersh Crawford, director of Oregon's Office of Medical Assistance Programs, stated that the pay raises advocated by the governor are "reasonable requests" and "much more reflective of what's going on in the health care industry as a whole" than the current rates. Kitzhaber's proposal also calls for the simplification of regulatory requirements to lower Oregon Health Plan's administrative overhead. But the governor's plan has met opposition from state Sen. Gene Derfler (R), who is "in line to be Senate president." Derfler said that "he sees no option" but to cut health services and require enrollees to pay a greater share of the costs. "I don't think the average citizen in Oregon wants to provide more of their earnings to support that health care [program]," Derfler said. To enact Derfler's suggested changes, however, the state would need approval by HCFA, which "has been inflexible in the past." Derfler said that if HCFA denies such a request, the state might have to start dropping people from the program, since physicians "cannot be expected to absorb more losses" and the state Legislature's GOP majority would not approve new taxes or tax increases to subsidize the plan (Rojas-Burke, Portland Oregonian, 11/30).