March 20, 2009
March 20, 2009
Oregon Association of Hospitals & Health Systems,
The Facts: Oregon’s uninsured population is at least 632,000 and hospitals and health insurance plans are committed to expanding health coverage. The following is a summary of a model proposed by health care stakeholders to raise revenue necessary to expand coverage to low-income adults and children.
How it works in Two Parts:
Medical claims: A claims assessment of up to 1% would be levied on all processed health insurance claims in Oregon with the exclusive intent of funding health care services for low-income adults and children. The assessment would be applied to the claims of insurers, third-party administrators, Medicaid managed care plans (MCOs) and Medicare contractors. The assessment would apply to medical claims, prescription drug claims and dental claims for customers who are insured, self-insured, or enrolled in Medicaid or managed Medicare plans.
Hospitals: The existing hospital tax, a variable-rate levy applied to the state’s 26 large urban “DRG” hospitals, would remain in place after it is set to expire on Oct. 1, 2009.
How much revenue would this model raise?
This proposed two-pronged model would raise an estimated $800 million in the 2009-2011 biennium.
A 1% assessment on medical and dental claims would generate $240 million for the 2009-2011 biennium. The federal match for that sum, based on a 1.7 average match rate, would be $408 million.
The hospital tax would generate an additional $146 million for the biennium, including the federal match.
How many people would be covered under this proposal?
The ultimate decision for coverage rests with lawmakers, but these funds could cover an estimated 60,000 children, and 45,000 low-income adults.
What are the advantages of this model compared to the 4% tax on large urban hospitals and the 1.5% health insurance premium tax the governor has proposed?
This model is more broad-based, equitable, sustainable and transparent. The claims assessment model reaches a broader collection base, including self-insured claims and Medicaid and Medicare contractor claims, and it generates more revenue that the governor’s narrow insurance tax. Statewide, Oregon’s commercial health plans report 10-year net income of 2%, and the governor’s proposed tax would disproportionately affect the small and medium-sized businesses they insure.
Oregon hospital’s average operating margin in 2008 was 3.72%, the lowest since 1999. Taxing hospitals at a high rate during a period when most are already cutting services and staff would erode their ability to operate as community safety nets. Hospitals take all emergency cases regardless of patients’ ability to pay, and have provided $2 billion in charity care over the past 5 years.
Hospitals and insurance plans would also participate in the processed claims assessment in the same way as any other business, labor trust or consumer would. This model would result in a significantly lower “cost shift” to insured businesses and individuals than the governor’s model, while still expanding health coverage in a very difficult economy. In 2007, alone, this cost shift added up to more than $1.6 billion.
Who developed this model?
The model was developed by the Oregon Association of Hospitals & Health Systems, Regence BlueCross BlueShield of Oregon, Legacy Health System, Kaiser Permanente Northwest, Providence Health & Services-Oregon Region, ODS Companies and PacificSource Health Plan.
More details on the proposal including charts and graphs click here