Rep. Dennis Richardson: Oregon’s Medicaid experiment

Dennis Richardson

Rep. Dennis Richardson (R-Central Point)

The Oregon Health Plan is Oregon’s name for Medicaid. Medicaid is the federal and state program that provides health care to poor adults and children. Its promise for decades has been to provide comprehensive medical care that would result in healthier people, making fewer trips to emergency rooms and hospitals.

Medicaid’s promises have failed to deliver for many of Oregon’s 670,000 current Medicaid “clients,” yet Oregon Governor John Kitzhaber plans to add more than 200,000 additional Oregonians to the Medicaid roles.

This Medicaid expansion comes with a tremendous price to taxpayers and creates a $1 billion state budget hole in 2015. In my opinion, it is likely Oregonians eventually will realize the Governor’s “Health Transformation” has created a medical monster and will demand a new and sustainable model of health care reform.

Recently, a highly regarded medical report, entitled, “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” was published in the New England Journal of Medicine. Among several important findings, the report concluded the following:

  1. Medicaid clients went more frequently to doctors, Emergency Rooms and Hospitals and consumed 35% ($1200) more in medical services than similarly situated adults who did not receive Medicaid benefits.
  2. Medicaid clients suffered less depression and concern about medical costs (which is not surprising since the Medicaid clients no longer were responsible for paying for the increased costs of their medical care and treatment).
  3. Even though the Medicaid clients had increased care, treatment and medical costs, “…Medicaid coverage generated no significant improvements in measured physical health outcomes….”

Essentially, Medicaid is government (taxpayer) paid medical care for low income adults and children.  As government-paid medical care,  Medicaid is expensive. (By analogy, imagine how much your car insurance premiums would increase if, in addition to the usual protection against unforeseen loses, your auto policy also paid 100% of your car’s routine maintenance, oil changes, new tires, and motor repairs.)

Oregon is in the midst of a health transformation from the customary “fee for service” model to a “managed care” system through Coordinated Care Organizations (CCO’s). The lack of health outcome improvements under existing Medicaid, we are told, will improve because of the transition to CCO’s.  Time will show whether or not the CCO model for Medicaid patients has better results. Since the Oregon Health Transformation’s CCO strategy is too new to evaluate, the Oregon Experiment’s data will serve as a benchmark with which the CCO strategy’s outcomes and costs can be compared in the future.

One thing is certain, the number of Oregonians qualifying for Medicaid only increases.

In addition to the present 670,000 Oregon Medicaid clients, at a cost of $6.8 billion (2011-13), Governor Kitzhaber intends to increase Oregon’s Medicaid ranks by more than 200,000.

In a recent newsletter I stated the following and it’s worth repeating:  “This expansion will add 225,000 new Medicaid patients beginning in 2014, without adding a single physician beyond the usual medical school graduates. Who will provide the additional medical services? Who will pay the costs? If the federal government can be trusted, paying the increased costs will not be a problem. The federal government promises to pay 100% of the expansion costs in its early years, then scale down to paying 90% in 2020 and beyond.”

This generous promise to pick up most of the tab is made by the federal government–which has not passed a budget in nearly four years, borrows $90 billion every month and has boosted thefederal debt to nearly $17,000,000,000,000 ($17 trillion). For the federal government to make good on its promises to all 50 States would cost $950 billion and add 21 million new Medicaid patientsover the next nine years. For Oregon to assume the federal government has the ability to add another trillion dollars of debt on top of its current spiral of indebtedness is more than a mere leap of faith.

Even if we assume the federal government will be able to keep its promises to fund the Medicaid Expansion, Oregon’s revenue stream is insufficient to keep pace with the State’s anticipated additional health care costs.

The Oregon Health Authority’s graph above shows Oregon’s anticipated Medicaid cost increases for the next three biennia. It also color codes the sources for funds needed to cover those Medicaid cost increases. Of special note are the purple segments showing additional State funds needed will total $1 billion in 2015-17 and $1.5 billion in 2017-19. The source of that money is unknown and has yet “To Be Determined (TBD).”

Oregon would be wise to have an alternative plan ready, in case Oregon’s “Health Transformation” and new CCO strategy fail to provide the promised improvement in health outcomes and health cost curve reductions or the federal government fails to make good on its promise of free Medicaid Expansion money from Washington, D.C.

An alternative Oregon health care plan will be needed when Governor Kitzhaber’s Health Transformation plan is fully implemented and when:

  1. the new federal Obamacare business owners’ mandate takes effect and businesses are required to provide and pay for health coverage for their workers, regardless of their businesses’ profitability,
  2. individual health policy premiums increase by 30%, 40% or 50%, and
  3. young adults pay substantially higher health insurance premiums to subsidize the high medical costs of older adults and lower the cost of their policies.

In sum, when Oregonians realize the true cost and consequences of Governor Kitzhaber’s “Health Transformation”, I expect voters will respond accordingly.

Eventually, due to grossly underestimated costs and complexity, I expect the repeal of Oregon’s Health Transformation and the federal Affordable Care Act (Obamacare).  If and when their repeal or reforms occur, it will be time to implement a free market, incentivized health care model. A new health plan will be needed that will actually result in better health outcomes because it contains financial incentives to do so.  A new health plan will be needed that will motivate individuals to make better health decisions and even change unhealthy lifestyles because they will derive direct financial benefits for themselves and their families.  I developed such a plan several years ago.  It is called the Oregon Base + Plan (OBP). I believe the time will come when the OBP will finally get serious consideration.  I designed it to serve as an example of what a free market, consumer empowering health plan might look like.  Since years have passed, adjustments may be necessary, but the OBP stands as a starting point for Oregon’s new health care model.  When the time is right for real change, we can have a health plan that empowers individuals and provides incentives for personal change.

In conclusion, merely providing expensive, taxpayer funded health care to ever-increasing numbers of dependent Oregonians should not be Medicaid’s goal. Its purpose from the beginning has been to improve health, quality and length of life of Medicaid clients.  The Oregon Experiment report demonstrates that Oregon’s existing Medicaid programs have failed in this part of their mission.  We will watch closely to see if Governor Kitzhaber’s health transformation and its CCO Medicaid model achieves the goals of lessening the increase of health costs and improving health outcomes of Medicaid clients.  If the CCO’s fail to deliver for Oregon and if the expensive mandates of Oregon’s Health Transformation become intolerable for Oregonians, it will be time to revisit Oregon’s health care system, innovate with a more effective and economical health care model—one that includes personal financial incentives for better lifestyle choices. A good starting point for such a new and vibrant health system might be the Oregon Base + Plan.

When Oregon is ready for real change in its health care system, it will be time to focus on innovative ways to provide incentives and break the cycle of dependency currently trapping too many low income Oregonians in poverty.

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Posted by at 08:11 | Posted in Gov. Kitzhaber, Health Care Reform, OR 77th Legislative Session | 37 Comments |Email This Post Email This Post |Print This Post Print This Post
  • JacklordGOD

    First of all, could we kindly stop calling people who use Medicaid “clients”?

    A client is someone who pays for a service, that’s me, the taxpayer. A recipient is someone who benefits from the service, that’s the joker going to the hospital on my dime. They are Medicaid recipients, the taxpayer is the client.

    Second – When will we call it good with this myth that if you simply start handing out free health care, somehow the costs for all of us who pay for our health care will go down.

    It was an idiotic premise. We have tried it with OHP, we have tried it with BO care, costs haven’t gone down. It’s time to move on.

    I propose a very simple solution. Make indigent medical billing fall under the same auspices as child support.

    Everyone knows the tail – If a parent doesn’t pay child support, it supposedly forces the other parent onto government aid, which costs everyone, so delinquent child support payers are subject to severe government pursuit for the funds.

    The same attends to medical care. You don’t buy insurance, burden everyone else with the bill, there is no reason for the government not to pursue you with equal zeal.

    Problem solved.

    Now, can we move on to something more productive like fixing potholes?


    Yes – Because I think deadbeat patients should be treated the same as deadbeats dads because they burden us all, that does mean I hate children, women and minorities hardest hit.

    • 3H

      I’m not entirely sure what you’re saying.

      Are you advocating that we get rid of Medicaid all together, and then require everyone to buy health insurance or face penalties from the Government?

      • JacklordGod

        Ahh, the old liberal strategy of feigning inability to read and then trying to reframe the argument away from the one made, into one you think you can win.

        Nice try. Re-Read, what I said was really clear.

        • 3H

          I did. And it’s perhaps a little more confused than you think. At least for me.

          Rather than make an assumption about what you were saying, I thought I would ask.

          You have several themes in your post, and I’m not sure if they are only related, or actually a connected and sustained thought. I don’t know if you’re talking about Medicaid, and people enrolled on it, or about people who don’t have any health insurance, but get medical care by emergency room (in the last part of your post). While what you’re saying is clear, who you are talking about is not.

          If you’re saying that asking questions to clarify is a liberal strategy, then I guess I’m guilty. I thought I’d seen conservatives do the same thing, but I guess was wrong.

          • JacklordGod

            Here’s the first point. People receiving Medicaid are recipients. People paying for it are clients.

            Here is the second point – In our experience in this country, it is largely a myth that costs go down if we start handing out free health care.

            Here is my third point – We pursue deadbeat parents for child support because the argument is made that their progeny burdens the taxpayer if such support is not collected. Obviously the same argument attends to people who go to the ER and skip out on the bill. Why not apply the same collections pursued at the state and federal level against ER skippers as we do against dead beat parents.

            Fourth point – If pursuing deadbeat patients in the same way we pursue deadbeat parents means I hate poor people, then doesn’t pursuing dead beat parents mean we hate parents?

            Now – What part of that are you unclear on. Seems pretty simple to me.

          • DavidAppell

            Here’s the first point. People receiving Medicaid are recipients. People paying for it are clients.

            And here I thought we were all Americans, trying to collectively advance our well-being — that people who are clients this year know that if they run into a situation they have the security of knowing they will be recipients next year.

            Of course, social darwinism is so much easier for certain minds to grasp….

          • DavidAppell

            Here is the second point – In our experience in this country, it is largely a myth that costs go down if we start handing out free health care.

            I am beginning to grasp the essence of your confusion.

            The first part is your inability to understand data and evidence, which clearly shows that every other developed country in the world have all have found a way to provide universal coverage at a fraction of our health expenditure.

            The second pertains to “handing out.” That’s not what actually occurs — instead everyone is taxed according to their ability to afford these taxes — the essential moral assumption behind the progressive tax structure we have — and in turn everyone receives an essential aspect of life, which is health care. Maybe you’re lucky enough to not need much of it this year, but next year maybe not — people do have strokes and car accidents, they lose jobs or their income fluctuates, industries rise and fall but the country’s citizen’s keep healthy and keep going.

            Clearly you, and many conservatives, are missing parts of the argument. Or grossly oversimplifying it to bolster your ideology.

          • .

            Oh you kid and melt’down Margot Kidder you, DA!

          • 3H

            Let me explain it one last time, I was asking because I wasn’t sure if you were just making several different points, or if you had them more closely connected together. You, finally, answered my question. Thank you for that.

            As for your points 3 and 4:

            1) Hospitals do send accounts to collections for patients who don’t pay.

            2) Dead beat dads and people going to the emergency room for medical care are very different. Dead beat dads are running out on a responsibility to their children. Needing medical attention is a little more necessary, especially in the moment.

            I have a child, and I run out… not very responsible.

            My child is sick, I don’t have medical insurance, so I take him or her to the emergency room. That seems a little more responsible to me.

            If you can’t afford medical insurance, it’s a good bet you can’t afford the emergency room either. What other option do they have? Stay sick? Let your children be sick without care?

            Many dead beat dads have an option, the just choose to ignore their children and their needs.

            I’m not sure why you chose to compare dead beat dads with people don’t pay their hospital bills. The circumstances are frequently quite different. Another false equivalency?

          • DavidAppell

            It’s all about stereotyping — about putting people into little black-and-white boxes that play easily to one’s ideology. That way there’s no need to think of them as human, to look at the details, to understand the complexities. Just pigeon-hole people into whatever bins your ideology requires….

          • DavidAppell

            3H, anything beyond a simple black-and-white view of the world is, of course, a liberal strategy.

            Please don’t confuse them further.

          • 3H

            Rupert doesn’t hate children, et. al. He just doesn’t care or understand their circumstances. And he mistakes his ignorance for wisdom and insight.

          • .


    • DavidAppell

      So you’re the “client” of the huge deduction on your home mortgage, paid for by raising the taxes of other people? Of the large tax deductions for health insurance, 2nd homes, property taxes, etc. all of which go to affluent people?

      Are hedge fund owners and investors like Mitt Romney “clients” because they get taxed at very low carried interest rates?

      • JacklordGod

        This is getting to be a bit of a tired argument with you David. Look, you don’t have much of an understanding of taxes.That’s excusable, because as a guy who want’s everyone else to support him you likely don’t pay much.

        Ill explain it to you ok?

        If you take the mortgage deduction that means you itemize. That means you give up the standard deduction. Therefore if you take the standard deduction, you are being subsidized as well by your logic.

        So no, people who take a tax deduction are not clients because nobody is paying for them. For your argument to hold you would have to show that non itemizers had their taxes raised when itemizers had these sorts of deductions put in.

        That is not the case. The share of taxes paid by the affluent has grown over the years faster that their share of the total income.

        We are now at the point where roughly half the country pays no federal income tax.

        That sure doesn’t align with your contention that somehow you are paying for the upper halfs deductions.

        This is why I think you have real problems as a science writer. You seem to have a complete inability to show any actual reasoning for your argument other than reciting liberal boiler plate.

        • DavidAppell

          I love how you try to justify your own subsidies while complaining about all others. (=Hypocrite.)

          The misunderstanding is yours. The fact is, you are getting a *huge* break on your mortgage, worth many tens of thousands of dollars over its lifetime.

          It’s money you don’t have to spend. That’s what’s commonly called a “subsidy.”

          There’s no inherent reason you should receive that — others who have decided to invest their money differently aren’t getting such big breaks.

          And you can’t even grok that — you actually think you’re ENTITLED. That’s the pièce de résistance — you actually think you’re entitled to your subsidies, and aren’t the same kind of suck-up you blame the wretched poor for being.

          I don’t blame you for being a Republican — clearly you had no other choice.

          • .

            U mag a gaggot U, DA!

        • DavidAppell

          We are now at the point where roughly half the country pays no federal income tax.

          Didn’t mommy and daddy make you study engineering, instead of what you really wanted to study?

          I think they did, which means you should at least understand basic math.

          So try this math: the share of the nation’s wealth owned by the bottom 50% of households is just 1% of total wealth:

          “An Analysis of the Distribution of Wealth Across Households, 1989-2010”
          Congressional Research Service

          So your complaint is that those with just 1% of the nation’s wealth aren’t paying income taxes — when they ARE paying payroll taxes, property taxes, sales taxes, gas taxes, etc.

          And STILL that’s not good enough for you.

          If that’s not the very definition of greed, I don’t know what is. Don’t you agree?

    • DavidAppell

      Of course, some people *can’t* buy insurance because their child is born with a disability, or suffers a disease for which the insurance company drops them, or the parent loses their job and can’t afford a family policy in the overpriced individual market…. But hey, this is America, no one has to care about anyone else, especially Rupert. Just so he gets his.

      • JacklordGod

        Why should I care about you? You have been pissing and moaning on this blog for close to a decade about your inability to get insurance. Do you do anything about it?

        No. You sit in your cheesy apartment writing a dopey physics blog and then piss and moan how you don’t have insurance and everyone else should care about you.

        Why don’t you go out and get a job that has health insurance? Failing that, why didn’t you go to school for something a little more lucrative than physics?

        You claim to have a PhD in physics. If that is true you had at least six years to figure out physics doesn’t pay a whole lot.

        So why should I care about you when you don’t care about yourself?

        Why should I sit and wonder how I am going to pay for my share of Appells health insurance when you, apparently, devoted no time to that thought while in school, and continue to do nothing about it.

        I’ve got news for you David. People tend to care very little about paying the bills of a guy who seems to think he has the right to demand of others that which he will not do for himself.

        You chose your life course, Why should I work harder to pay the bills of a guy who chooses not to?

        You are the recipient David, you take.

        I am the client. I pay for the likes of you.

        Enjoy it. As a taker, you get the benefits of others labor while they do the work. All you give up in return is your self worth. You are left in the position of demanding others provide for you. That is the price you pay for taking it easy and that is the life course you have chosen. Live with it.

        • DavidAppell

          I don’t think you care about anyone else but yourself, Rupert. You’ve repeatedly made your priorities clear, and that selfishiness is the essence of American conservatism. It always has been, but it’s gotten worse since Reagan.

          The argument for universal health care is a moral one, that all developed countries in the world accept as legitimate — everyone in society should have access to the health care they need, regardless of circumstances. It’s about respecting people regardless of their background, and in return getting the same respect and assistance if and when you need it. We have nothing like that in the US — we have affluent people who insist on getting all kinds of subsidies and tax breaks for themselves, while completely ignoring the circumstances of people not in their situation. It is a fundamental ethical failing of our country, and especially a fundamental ethical failure of religious-bases conservatism, which does the opposite of what it preaches, and we are paying the price in medical bankruptcies, poorer health, a declining society, and in some locations now life expectancy is actually decreasing. That is unheard of in the developed world.

          PS: I haven’t even lived in Oregon for a decade, let alone been on this blog that long. Another classic Rupert boner.

          • guest

            Oh, PS!
            Well, you prattle like ‘TheoBore’ residing in Skamania County. WA.

            ‘Looks’ about the same butt how about calling the Lars Larson Show for a voice check?

            Mr. Larson puts naysayers at the head of the line, evidently so they can open their mouths and
            let their brains fall out.

  • Ralph

    Help me please. I need help with my medical bills. Thanks. Please help me. I love free help and I need free help, otherwise I would have to pay.

  • DavidAppell

    “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”
    — John Kenneth Galbraith

    • guest

      “It has been the acknowledged right of every Marxist scholar to read into Marx the particular meaning that he himself prefers and to treat all others with indignation.”

      — John Kenneth Galbraith

      • DavidAppell

        Great, except we aren’t talking about Marxism.

        • guest

          Try turning yourself right side up for once, Mr RedCollageAppell.

  • Jeff-r

    “If and when their repeal or reforms occur,” That will not happen. To use a boat analogy, that ship done sank!

    “…it will be time to implement a free market, incentivized health care model.” the market had plenty of time to react when health care fell flat under Clinton It did nothing as it has no incentives to insure those with pre-existing health conditions and makes money in denying claims.

    “A new health plan will be needed that will actually result in better health outcomes because it contains financial incentives to do so.” That should have been started and in force a long time ago.

    “A new health plan will be needed that will motivate individuals to make better health decisions and even change unhealthy lifestyles because they will derive direct financial benefits for themselves and their families.” Yeah, and I want a new pony. At a certain point, the incentive is not worth the effort. Unless everyone gets on board with a healthy lifestyle that means of cost reduction will not work. There will always a segment that thumbs their nose at doing what is right because they can afford to ignore it. The cost for that behavior is spread out to everyone else in the pool.

    • DavidAppell

      When are you people going to learn that the (so-called) free market is fundamentally incapable of providing universal health care?

      I swear, you all are brainwashed.

      The advantages of a free market system do not apply to health care, primarily because (1) you cannot predict when you will need care or (2) what care you will need, and (3) you can’t comparison shop.

      Buying health care is not like buying shoes. Thus, you need an insurance system. And private insurance systems demand a profit, and a large administrative staff to analyze and deny claims. (*Not* paying for care is, after all, how they make money.)

      The classic paper on this is by Kenneth Arrow:

      “Uncertainty and the Welfare Economics of Medical Care,” Kenneth J. Arrow, The American Economic Review, Vol. LIII n 5 (Dec 1963)


      • guest

        “You people” you say DA? Sounds a bit alien but considering the source, no surprise.

        “The trouble with our Liberal friends is not that they’re ignorant; it’s just that they know so much that isn’t so.”

        • DavidAppell

          I meant “you people,” which is why I wrote it.

          Do you have anything interesting to say?

          • guest

            “You people” – Mr. Appell, self anointed left wing socialist elitist wand waving pontificator, wholly see yourself as nearer to your deity than we.

            Of course, what you don’t see and what dissenters with your regency would roundly cheer as a hit attending remedial treatment: Your repeating Elin Nordegren 101 until what lies in the Woods emerges after amassing a proper lumpectomy.

    • DavidAppell

      Jeff: Just curious, which of your own bad behaviors do you think aren’t being spreaded across the pool?

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