Threatened Medicaid Referral Creates Capitol Shivers

 A serious threat by Rep. Julie Parrish, R-West Linn, to refer legislation to raise funds to sustain Oregon’s Medicaid program from an increase a hospital tax and a new tax on health insurers has sent shivers down the spines of legislative leaders and created shudders for other interest groups that could be targets to patch Oregon’s budget hole.

 A serious threat by Rep. Julie Parrish, R-West Linn, to refer legislation to raise funds to sustain Oregon’s Medicaid program from an increase a hospital tax and a new tax on health insurers has sent shivers down the spines of legislative leaders and created shudders for other interest groups that could be targets to patch Oregon’s budget hole.

A big part of Oregon’s budget fix approved this session could spring a leak if Rep. Julie Parrish, R-West Linn, successfully refers the legislation that increases a hospital provider tax and adds a tax on insurers to sustain funding for Oregon’s Medicaid program.

Parrish followed through on her threat by filing a referendum petition with the Oregon secretary of state this week. She will have 90 days to gather less than 59,000 signatures of registered Oregon voters to refer the Medicaid funding package to the ballot. Parrish reportedly has monied backing to support the referral drive.

The threat by Parrish of a referral of Medicaid legislation has created what could fairly be called a panic in the state Capitol because it could undo the only major step lawmakers took this session to address a projected $1.4 billion budget deficit. The uncertainty caused by a referral would add to anxiety caused by congressional consideration of an Obamacare replacement that would reduce Medicaid funding sharply over the next decade.

Parrish says her goal is not to gut Medicaid, but “hold it accountable.” She wants to apply voter pressure to ensure Oregonians receiving Medicaid benefits are actually eligible and to address state mismanagement such as expensive IT failures. Parrish calls the hospital provider and insurer taxes amount to a sales tax on health care services and private health insurance, which are simply passed along to consumers. Coordinated Care Organizations also would face a tax in this legislation. A broad coalition of health care providers, insurers and CCOs supported the revenue-raising to maintain Oregon’s expanded Medicaid coverage. Parrish claims there were three other bills introduced this session that would have reduced the Medicaid funding gap without taxing hospitals and health insurers.

If a possible referral isn’t contentious enough, Democratic legislative leaders may have sparked an even wider partisan wildfire over a bill that would schedule a referral vote next January 23 and allow lawmakers to write the referral ballot title, which is sometimes all voters ever read about a measure.

Democrats defended the earlier vote as a way to prevent a deeper budget hole. If Oregonians rejected the Medicaid tax measure in a January special election, then lawmakers would have time to find an alternative during the 2018 short legislative session. Republicans charged Democrats with ambushing Oregon’s referral process and trying to suppress voting by scheduling a special election on a date with an anticipated lower voter turnout.

Parrish isn’t alone in threatening a referral. In fact, she finds herself a strange bedfellow with an entity she rarely agrees with – SEIU 503.  The largest union in the state made headlines earlier in session when it held a rally on the steps of the Capitol and threatened to refer any transportation package bill unless lawmakers secured new revenue for schools and other vital services. 

She and some Democrats also have threatened to refer the $5.2 billion transportation funding package. The threat from Democrats differs from Parrish. They want to hold the transportation bill, which has fairly broad bipartisan support, hostage to try to force legislative action this session on a corporate tax measure. After the transportation package passed out of committee Saturday evening, 16 House Democrats sent a letter to Speaker Tina Kotek urging her to “re-focus on the all-important task of identifying addition revenue.”  The implied threat hanging over the letter doesn’t go as far as SEIU’s saber-rattling, but it does raise concerns among stakeholders as we enter the final days of session.

Democratic leaders, including Governor Brown, threw in the towel on a corporate tax bill a week or so ago after it became clear there wasn’t consensus on a replacement for the current corporate income tax – and not enough votes to pass anything in the Senate. Nothing would be done to change the corporate tax, they said, until the 2019 legislative session.

The Oregon legislature is expected to wrap up remaining budgets and head home before its constitutionally mandated July 10 adjournment deadline, unlike at least four other states – Washington, Illinois, Maine New Jersey. It took three special sessions before Washington lawmakers reached a budget deal. New Jersey’s budget stalemate resulted in a partial government shutdown, but a solution was suddenly found after social media exploded with pictures of Governor Chris Christie lounging on an empty beach that was closed to the public because of the shutdown. Illinois has been in budget gridlock for three consecutive years.

Referral of the Medicaid funding package could bring Oregon back to the brink of a deep budget hole and put more pressure on legislative leaders to look at other tax hikes. Some education advocates are already urging lawmakers to resume work on a corporate tax measure earlier than the 2019 session, and perhaps as early as a special session later this year. If the Medicaid referral is successful, pressure would grow to look at cuts, not just in Medicaid, but also in the Public Employees Retirement Fund.

As noted in a previous Oregon Insider, adjournment can’t come soon enough, but even when it does it will seem more like an intermission than the end of the play. The animating issues of the 2017 session – the budget hole, Medicaid spending, corporate taxation and transportation funding – may still be anything but resolved.