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Repeal of provider tax could cost state more than $840 million

A financial estimate of the impact of partial repeal of the law was approved Friday morning.

CAPITAL BUREAU - A legislative committee said Friday that a repeal of the health care funding package could cost Oregon more than $840 million.SALEM — If Oregon voters overturn aspects of the state's health care funding law in January, state government could see its expected revenues drop by $840 million or more.

Three Republican lawmakers want to refer sections of the law — which establishes assorted revenues to help Oregon pay for its Medicaid program — to voters.

The petitioners must gather nearly 59,000 signatures by Oct. 5 to get the petition to the ballot in a January special election.

A financial estimate of the impact of partial repeal of the law — what voters will see if the issue gets to the ballot — was approved, after some dispute over terminology, by a five-member committee of public officials at the Capitol Friday morning.

The estimate states that if the bill were partially overturned, there would be a reduction in state revenues between $210 million and $320 million, resulting in a potential reduction in matching federal funds from $630 million to $960 million or more.

The petitioners want to challenge what they are framing as a "sales tax" on health care, and what their opponents maintain are standard assessments on health care providers that pay for the Oregon Health Plan, the state's Medicaid program.

The law that petitioners want to partially repeal includes a mechanism often referred to as a "provider tax."

Under this mechanism — employed by every state except Alaska to help pay for Medicaid — states collect payments from health care providers in order to pay their share of Medicaid costs.

The dollars that a state collects through these payments are matched by the federal government. The combined pool of federal and state money is distributed back to providers for serving Medicaid patients.

The state legislation that petitioners want to partially repeal created some additional revenue sources on top of Oregon's existing 5.3 percent assessment on certain urban hospitals.

Petitioners want to refer a .7 percent assessment on non-rural hospitals that the law contains, as well as assessments on insurers, the Public Employees Benefits Board and coordinated care organizations — the regional provider networks that serve OHP patients.

A provision of the law allows insurers to increase premiums by up to 1.5 percent to recover the costs of a 1.5 percent assessment.

The range in state revenues that the committee approved for the financial estimate Friday — $210 million to $320 million — is due to an open question on the legal interpretation of the referral petition.

Attorneys for the Legislature have opined that the petitioners failed to include a section of the legislation in their petition, meaning that a partial repeal would merely delay implementation of the .7 percent assessment, not dispense with it altogether.

That's an interpretation the petitioners take issue with and plan to contest.

Meanwhile, the heads of a legislative committee that writes the state's budget — Sen. Richard Devlin, D-Tualatin, and Rep. Nancy Nathanson, D-Eugene — have said publicly that the numbers approved for voters' eyes are likely conservative estimates of the financial impact of a partial repeal.

The estimate approved Friday of the impact to federal revenue is $630 million to $960 million "or more," based on an average federal matching rate.

But the federal match varies based on who the Medicaid patients are. For patients covered under the recent expansion of Medicaid under the Affordable Care Act, the portion that the federal government pays is actually much higher than the 75 percent average used to calculate the percentage in the estimate.

So, Nathanson and Devlin say, the impact on revenues the state brings in from the feds could be substantially higher than the $630 million to $960 million that voters would read about in official materials.

That's because federal law requires states to cover certain people through Medicaid.

So in the event of a partial repeal, Nathanson and Devlin say, Oregon adults covered by the Affordable Care Act, who are not required by federal law to get Medicaid coverage, would likely be cut, and the state would forgo federal revenues that would have been based on a higher match rate of 94 percent.

The petitioners — Republican State Reps. Julie Parrish, of Tualatin/West Linn, and Cedric Hayden, of Roseburg — have also disputed the numbers approved Friday, but say they're too high.

In a Sept. 20 letter to the committee, Parrish and Hayden argued that the state overshot and "miscalculated the need for Medicaid."

They argue that thousands of people will be kicked off Medicaid due to scheduled increases in the minimum wage, which could render them ineligible for the program.

They also contend that recent efforts by the Oregon Health Authority to clear a backlog of OHP patients whose qualifications for Medicaid were in question further reduces the expected caseload and, consequently, the amount of federal dollars the state would bring in.

As of Aug. 31, OHA found that 22,937 people on the state's Medicaid rolls were no longer eligible for the program.

But state officials say they consider the scheduled minimum wage increases when making caseload projections, and say they also considered the health authority's efforts to shore up its Medicaid rolls.

The estimate can be appealed to the Oregon Supreme Court until Sept. 29.