Groundbreaking Health Care Reform Victim of Politics, Bad Decisions

OHP began as an effort to expand access to health care through broadening the Medicaid program and an employer mandate to provide health insurance to workers.

The employer mandate never was enacted, however, and the drama of the Oregon Health Plan (OHP)—which would garner nationwide headlines—centered on the state's novel initiative to expand Medicaid through rationing of services: Oregonians with incomes below 100 percent of the federal poverty level would become eligible, and the expansion would be made affordable by offering recipients a benefit package that was more limited than traditional Medicaid.

“OHP was created by the legislature following extensive grass-roots organizing, some of which was spearheaded by Portland psychiatrist Ralph Crawshaw, M.D., whose public interest health group, Oregon Health Decisions, did a lot of the preparatory and ground work to set up the passage of the bills in the 1989 legislative session,” recalls Oregon psychiatrist David Pollack, M.D., who was also involved in the OHP. “The employer mandate was one of the three bills that passed, but because of heavy lobbying from the small business community, it was voided before it could be implemented.”

Through an arduous process of public and professional input, a prioritized list was developed that ranked medical conditions and treatments based on clinical effectiveness and “net benefit.” The state legislature would draw a line on the list every two years depending on how much it decidedto spend on Medicaid, with Oregon Medicaid paying for all services above the line and no services below it.

Mental health and substance abuse services, highly valued in surveys of the public, were integrated into the priority list and placed fairly high. That process was described by Pollack in a 1994 article in the Millbank Quarterly. Pollack is a professor of public policy in the departments of psychiatry and public health and preventive medicine at the Oregon Health and Science University.

Early reviews of the Oregon plan were positive. The percentage of people who were uninsured dropped from 18 percent in 1992 to 11 percent by 1996, largely because of the increased coverage offered to low-income individuals and families through OHP, but also because of strong economic performance in the private sector.

In 2002 state leaders were looking to go beyond that by expanding the eligibility for Medicaid from 100 percent to 185 percent of the federal poverty level.

But in the wake of the 9/11 attacks, the state experienced a severe economic downturn exacerbated by local factors and strong anti-tax sentiments in the state.

No new state funds were available to extend OHP coverage. As Oberlander explained, the expansion to 185 percent of poverty was financed by dividing the health plan into two parts, OHP Plus and OHP Standard.

OHP Plus covered populations categorically eligible for Medicaid (such as low-income pregnant women and children), and its benefits remained based on the prioritized list. OHP Standard covered the expansion population: single adults, couples, and parents not eligible for Medicaid under federal guidelines.

OHP Standard enrollees received a reduced benefit package estimated at 78 percent of OHP Plus's value, with covered services still being ranked accordingto the priority list. Premiums for OHP Standard enrollees were also increased, andprogram enrollment rules were tightened; providers were allowed torefuse to see those who could not make their copayments.

“[T]he new cost-sharing and premium policies were the price that had to be paid to expand coverage and reduce the state's uninsured population, given fiscal constraints,” Oberlander noted.

In the year following these changes, enrollment of the Medicaid-expansion population fell 53 percent, dropping from 104,000 in January 2003 to 49,000 in December 2003. And in the ensuing 18 months, OHP Standard enrollment fell by another 50 percent.

Today, only about 24,000 enrollees remain in the program, and it has been closedto new enrollment since 2004. Oregon's uninsurance rate has climbed to 17 percent—virtually the same level as when OHP began operation in 1994.

“It is no longer a trade-off of covering fewer services in order to cover more people,” Oberlander writes. “OHP is now covering both fewer services and fewer people, and the elimination of entire benefit categoriesand rollback in enrolled beneficiaries looks more like the arbitrary cuts common in other states than the rational and equitable model of prioritization to which Oregon aspired.”

What happened?

Oberlander emphasizes the underestimation of the effect of price sensitivity on the part of beneficiaries responding to the new premium and copayment policies. Also critical was that the federal government had placed fairly severe restrictions on moving the cutoff line on the prioritized list of services, a restriction that cut to the heart of OHP's effort to“ ration rationally.”

The disastrous economic slump in 2002 could not have come at a worse time.

“Health costs were once again increasing, in Oregon and nationally, as the moderate growth of the mid-1990s gave way to renewed medical inflation,” he said. “Oregon's rationing system provided only a limited defense against rising costs: the prioritized list does not control costs for covered services, and Medicaid managed care proved no cure-all for medical inflation. Moreover, the recession, high unemployment, and a growing uninsured population generated pressures on Medicaid as more people qualified for public insurance.”

But Oberlander cautioned that health reform is not dead in Oregon, and leaders who spoke with Psychiatric News confirmed that efforts are under way to breathe life back into the OHP.

“It would be a mistake to count out Oregon's health reformers, who have proved resourceful and adaptive in their drive to expand coverage,” Oberlander suggested. “Now that Oregon's economy is recovering from its calamitous fall, reformers are once again on the march.”

Pollack, who reviewed the Oberlander article for Psychiatric News, called it a fair outline of the factors that contributed to the demise of the OHP, but said that the effects of the devastating economic downturn of 2002 were underestimated.

Today, he said, things are looking up, with a revitalized economy and a reshuffling of the political deck after the November 2006 elections. Pollack described a new effort by the Oregon Health Services Commission to“ reprioritize” the list of Medicaid-fundable health services into a single list that would allow for coverage of more people.

According to Darren Coffman, executive director of the Oregon Health Services Commission, the commission first developed a framework for what the new list should look like by defining a rank-ordered list of nine broad categories of health care: maternity and newborn care; primary prevention and secondary prevention; chronic disease management; reproductive services; comfort care; fatal conditions, in which treatment is aimed at disease modification or cure; nonfatal conditions, in which treatment is aimed at disease modification or cure; self-limiting conditions; and inconsequential care.

Next, each of the 710 conditions on the 2005-07 list were assigned to one of the nine categories, and a list of criteria was developed to sort the line items within the categories. These criteria include impact on healthy life years, impact on suffering, population effects, vulnerability of population affected (to what degree does the condition affect vulnerable populations such as those of certain racial/ethnic groups or those afflicted by certain debilitating illnesses such as HIV disease or alcohol and drug dependence?), tertiary prevention, effectiveness, need for medical services, and net cost.

The commission then devised a method, which included input from the public, to intermix condition-treatment pairs across the nine categories and create one reprioritized list of services.

Major depression is ninth on the newly prioritized list, and schizophrenia disorders are 27th. In addition, several legislative measures are under consideration in the Oregon state legislature designed to achieve universal health insurance coverage in the state—measures that Pollack said are more far reaching even than the Massachusetts state statute.

“The stars are lining up,” he said. “The economy is getting better, and there has been a realignment of political power along with a much stronger mandate for doing something about this problem.”

“Healthcare Reform Interrupted: The Unraveling of the Oregon Health Plan” is posted at<http://content.healthaffairs.org/cgi/content/full/26/1/w96>; a description of the repriortization process and the new list are posted at<www.oregon.gov/DAS/OHPPR/HSC/Draft2007-09List.shtml>.▪