Senator Jeff Kruse to Kitzhaber: save Medicaid before funding your new initiatives

by Sen. Jeff Kruse (R-Roseburg)

Monday the Governor had an all day Mahonia Hall meeting with Legislative leadership.  The purpose of the meeting was to try and develop a common strategy for balancing the budget and ending the Legislative Session.  Tuesday, in our Senate Republican caucus meeting we were presented “the plan”.  The first thing that stood out was the fact the $3.5 billion budget hole talked about in January was now presented as a $472 million hole.  In theory this is a manageable number and adjustments can be made to fill this hole.  If this had been the whole picture it would have been good news.  Unfortunately the one budget not on the list was the Medicaid budget.

We have known from the beginning of the session that the general fund shortfall in Medicaid was around $600 million, which equates to a $1.2 billion shortfall when federal matching funds are factored in.  Why did this item not make the Mahonia Hall list?  One can only assume the problem has been solved, from their perspective.  Here is how they are proposing to “solve” the problem; a 19% cut in provider reimbursement rates, and increase in the hospital tax and an assumed savings of over $300 million in system transformation.  The first two could break the system and the third one is fictional.

The increase in the hospital tax violates a signed agreement made two years ago with the creation of the tax.  The agreement stated that the tax would not be increased for four years.  Two years later the Legislature is violating its own agreement (business as usual).  Medicaid providers are already being paid at about sixty cents on the dollar and I believe a further reduction would drive many out of the market.  But as bad as these two provisions are, the assumed savings is even worse.  I have studied the assumptions and none of them will result in the savings they claim, especially in the short term.  Yet this is how they plan to balance the budget.

In previous newsletters I talked about the Transformation Workgroup and the subsequent joint committee created to deal with the issue.  We were given a nearly impossible task, but I have spent countless hours on the subject.  Two hours before our scheduled committee meeting Wednesday night we were told legislative leadership had instructed the committee chairs to send the bill (House Bill 3650) to the Ways and Means Committee without any amendments.  Two points to mention here are the fact the committee had in its possession a major re-write of the bill with input from all stakeholders and substantive bills are not supposed to be amended in Ways and Means.  Fortunately our rules would have required unanimous consent to move the bill on Wednesday night, and I refused to give it.

Why the rush to send this un-amended bill (basically the Governor’s version) to Ways and Means?  Basically they need the bill so they can count the assumed savings in the budget.  The Legislature is required by the Constitution to create a balanced budget.  Unfortunately the process allows us to be balanced with a whole list of assumptions around revenue and expenditures.  In reality the numbers don’t have to be trued up until the last day of the biennium, so the budget we will pass in June doesn’t actually have to be a real one.  I just think it is fundamentally wrong for us to be doing any budget based on numbers we know aren’t real, but that is exactly what will happen.

I want everyone to remember this next February during our 35 day Session.  At that point what we will be told is we are in a severe crisis and the only way out will be tax increases or some other revenue enhancement.  The reality is we could have avoided the future crisis by dealing with reality now.  The additional dollars the Governor wants for several new initiatives should actually be going into saving the Medicaid system. These are real solutions, but not if we are not willing to be intellectually honest with ourselves and the people of Oregon.  There are many hard decisions to be made, but they will be even harder if we put them off until later.