Why Oregon's rationing plan is gasping for air

October 8, 2004

The once bold effort to expand coverage by rationing services is no longer the talk of the nation. Instead, it's simply trying to survive.

In 1994, the state of Oregon did something no other state had ever done before: It held a public discussion about which healthcare services the government could afford to cover and which it couldn't, and then with the money saved by reducing benefits, the state expanded its Medicaid program to establish a basic health insurance package for most low-income residents. To further reduce costs, it placed the bulk of its Medicaid beneficiaries in managed care.

This first-of-its-kind effort to prioritize healthcare services in order to make them more universally accessible made headlines across the country-and made the architect of the plan, soon-to-be-elected Gov. John Kitzhaber, a charismatic emergency physician-turned-politician, a national celebrity.

This year, as the Oregon Health Plan marks its tenth anniversary, the once revolutionary program has fallen on hard times. Since January 2003, enrollment in the standard benefit package-which essentially targets the working poor-has been cut dramatically, from 90,000 to about 54,000. This July, the state closed the program to all new enrollees, with the hope of slashing enrollment further, to about 24,000 by June 30, 2005. Even that number will have to be revised downward if certain revenue projections aren't met.

The retrenchment will almost certainly have a profound effect on many doctors and their patients. "The concept of preventive care goes out the window," says Charles E. Hofmann, an internist in Baker City. "Now, instead of coming in with a mild case of bronchitis, patients will show up in the ED with pneumonia. Instead of coming in with a mild problem with their diabetes, they'll show up with ketoacidosis." Adds FP Toni L. Hero from Gresham: "A lot of patients don't even realize further cuts could be coming. The ones who do realize it are quite despondent."

How could a program that began so promisingly now teeter on the verge of collapse? And what lessons does the Oregon experiment hold out for other states struggling with their own Medicaid woes?

Hamstrung from the get-go Architects of the Oregon Health Plan envisioned a process by which public debate over healthcare would focus not on who should be covered, but on what should be covered, says Bruce Goldberg, administrator of The Office for Oregon Health Policy & Research. The prioritized list of services that resulted from this debate was intended to be flexible-expanding in good economic times, contracting at other times.

That was the theory, at least. "Ten years later, we haven't been able to get to that," says Goldberg, an FP who was appointed administrator of OHPR in early 2003.

Lynn Read, who heads the Office of Medical Assistance Programs, agrees, adding, "In order to get the plan approved by HCFA [now the Centers for Medicare & Medicaid Services], we had to agree to seek federal authorization before making any changes, including where we drew the line on the list of services."

That restriction had little impact during the prosperous 1990s, when Washington approved several reductions in services, but also permitted the state to expand coverage to new groups. By the end of the decade, however, the economy had started to sour, and cost-minded lawmakers sought to reduce services further. But federal officials balked, refusing, during the 1999 biennial session, to let the state make any more cuts to its prioritized list of services.