Medicaid Spending Could Be Oregon Budget Lynchpin

Oregon officials a major budget hole, which could get unpredictably worse depending on what the Trump Administration and a GOP Congress comes up with to replace Obamacare and its expansion of Medicaid coverage.

Oregon officials a major budget hole, which could get unpredictably worse depending on what the Trump Administration and a GOP Congress comes up with to replace Obamacare and its expansion of Medicaid coverage.

Governor Brown unveiled her recommended budget today, with the gloomy prospect of a $1.4 billion budget shortfall to overcome. However, what may haunt her budget more than anything else is the unknown impact of decisions on health care by the incoming Donald Trump administration.

Brown can’t count on a big pot of new revenue after voter rejection of Measure 97 and she knows the Public Employees Retirement System impact on spending looms large. What she or no one knows for certain is how the anticipated repeal of Obamacare, including funding for a major Medicaid expansion, will impact state budgets.

States that expanded Medicaid eligibility under Obamacare and received federal funding to cover a big chunk of the cost already face the reality of a federal funding phase down, putting more pressure on state funding. If the Medicaid expansion subsidies under Obamacare go away, the big question is what, if anything, will replace them.

Congressional Republicans, including Congressman Tom Price, R-Georgia, who will become secretary of Health and Human Services under President Trump, have argued for block grants to states. They say block grants give states more flexibility in managing their Medicaid programs. But that doesn’t mean the block grants would be large enough to patch the budget hole left by repealing Obamacare Medicaid subsidies. The funding difference could aggravate the existing $250 million+ hole to pay for expanded Medicaid enrollment.

Obamacare repeal also would potentially eliminate the individual health exchange. Republicans are talking about replacing the Obamacare mandate with tax incentives to encourage uninsured people to take out their own health insurance. Depending on whether the provision regarding pre-existing conditions is maintained or qualified, some people – for example, people with chronic diseases such as diabetes –  could find themselves priced out of the market. That might be politically untenable and ethically suspect to leave what could be a significant cohort of people dangling in the wind without any health insurance.

While repeal or alterations of Obamacare seems like a given, when a replacement will be agreed to is less certain. That could mean the Oregon legislature – as well as legislatures across the country – could be wrapping up their budgets while Congress is still deciding on how to replace Obamacare provisions.

Whatever one thinks of Obamacare as ealth care policy, one fact is indisputable – its provisions are interdependent. Pull a string here and something unravels over there. That’s especially true regarding budgetary impacts. Brown said in her budget message she would protect funding for Medicaid patients “without reducing eligibility or the level of services required.”

While it’s true many health insurers have abandoned the individual health insurance market, it’s not a certainty they will rush back under a new plan, especially one that may not have any more market power than the Obamacare approach. 

These gives and takes have broader implications, but in the short term they pose serious problems for Oregon policymakers who must pass a balanced budget. Adding insult to injury, the federal government under a new administration may push for a cut of the Oregon settlement with Oracle over the Cover Oregon fiasco. So far, Oregon has offered used Oracle servers.