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Budget committee advances health care provider tax

A package of new taxes on health care providers, insurance premiums and coordinated care organizations is expected to raise $673 million to offset increases in Medicaid costs.

CAPITAL BUREAU - The Legislature's budget-writing committee has passed a tax on health care providers to help offset the cost of expanded Medicaid.SALEM — The Legislature's budget-writing committee on Tuesday advanced a bill over Republican objections that would increase the state's tax on health care providers to cover the costs of expanding Medicaid.

The Joint Committee on Ways and Means also advanced Tuesday a $19.9 billion total funds budget for the Oregon Health Authority for the next two years, including $2.2 billion from the state's General Fund.

Both bills now go to the floor of the Oregon House of Representatives.

The increased tax would raise revenue from hospitals, insurers and coordinated care organizations — the regional networks of providers serving patients on the Oregon Health Plan, Oregon's version of Medicaid — to help cover the costs of the government's health care plan for the poor and other qualifying groups.

The bill is expected to raise $673 million in the next two years to fund Medicaid and to help fund reinsurance, a reimbursement system that protects insurers from high claims.

Currently, certain urban hospitals are assessed a 5.3 percent provider tax that is set to expire in 2019. The legislation would extend the assessment to 2021 and increase it to 6 percent for those hospitals, and establish a new 4 percent on net revenues of rural hospitals.

Some Republicans criticized the proposal, contending the costs of care were likely to be shifted to consumers.

Sen. Bill Hansell, R-Athena, a member of the committee, voted against advancing the provider tax legislation.

Hansell said he did not object to the provider assessment itself, as it appeared that hospitals and other providers were on board with the provisions in the bill, but he was concerned about the 1.5 percent assessment on private insurance premiums outlined in the legislation, a concern shared by Sen. Alan DeBoer, R-Ashland.

Because it creates new taxes, the bill requires a three-fifths majority in both chambers to pass. Republican opposition Tuesday could indicate that the legislation faces some hurdles to meeting that threshold.

The current version of the bill also taxes coordinated care organizations and the Public Employees Benefits Board, which administers benefits for certain public employees.

Medicaid is largely paid for by the federal government. But Oregon, like other states that signed on to expand Medicaid under the Affordable Care Act, has to take on an increasing share of the costs of the expansion under the act

The $673 million in expected proceeds could yield nearly $1.9 billion in matching federal funds for the state.

The tax is a significant part of Democratic lawmakers' efforts to close what they say is a $1.4 billion gap between expected revenues and what it would cost to maintain all state services at current levels.

Democratic lawmakers are also working to restructure the state's business taxes to raise revenue for all state services.