Health Reform Policy to Practice: Oregon’s Path to a Sustainable Health System: A Study in Innovation

Health Reform Policy to Practice: Oregon as a Case Study for a Path to a Comprehensive and Sustainable Health Delivery Model offers a real world example of an innovative, successful and comprehensive program conducted by the U.S. State of Oregon.

In 1991, Oregon embarked on a journey to improve health for all its citizens by radically re-thinking how to approach health care for long-term benefits. Over more than two decades, Oregonians have participated in a dialogue to create a new approach to solve the dilemma of providing high quality health care that is affordable and effective. Traditionally, health care reform looked at cutting people from care, cutting provider rates or cutting services. Oregon’s approach is unique in that it built a new system of delivery from the ground (community) up.

The Oregon model took a “Fourth Path to health care by redesigning the clinical delivery system through reducing waste, improving individual health and prevention, and therefore reducing utilization of services, creating local accountability, aligning financial incentives and creating fiscal accountability. This is not only an Oregon story, but a national one as other states, payers and purchasers implement health care reform.

• Written by content experts who have been actively involved in health care reform efforts
• Provides clear translation of current information and experience to implementation
• Explores the potential impact of the Oregon experience on national and international health care reform efforts

• Language: English
• Publisher: Academic Press
• Release date: Aug 4, 2017
• ISBN: 9780128098288

Book preview

required.

Section I

Origins of Oregon Health Reform

Outline

Chapter 1 The Oregon Narrative: History of Health Reform in Oregon

Chapter 2 State-Level Design: The Coordinated Care Model

Chapter 3 The Politics of Creating the Coordinated Care Organizations

Chapter 4 Strategic Communication and Engaging the Public

Chapter 1

The Oregon Narrative

History of Health Reform in Oregon

Mike Bonetto,    Tenfold Health, Bend, OR, United States

Abstract

Oregon has a long history of using bold innovations to reform health care finance and delivery. While these efforts have taken a few forms, certain goals have remained constant. One aim is to provide health insurance to as many Oregonians as possible. A second is to improve the quality and efficiency of the health care provided. And a third is to involve community members and stakeholders in drawing up reforms. State efforts to develop comprehensive health reform policy began in the 1980s and eventually led to the creation of the Oregon Health Plan, a nationally recognized model that limited the number of covered services through a prioritized list and in return expanded coverage. Decades later, in 2012, the state created Coordinated Care Organizations (CCOs). The transformational elements of this bipartisan legislation included integrating and coordinating benefits and services, providing local accountability for health and resource allocation, creating standards for safe and effective care, and setting a global Medicaid budget tied to a sustainable rate of growth.

Keywords

Medicaid; Oregon Health Plan; John Kitzhaber; rationing

Oregon has a long history of using bold innovations to reform health care delivery and finance. While these efforts have taken a few forms, certain goals have remained constant. One aim is to provide medical insurance to as many Oregonians as possible. A second is to improve the quality and efficiency of the health care provided. And a third is to involve community members and stakeholders in drawing up reforms. State efforts to develop comprehensive health reform policy began in the 1980s. These reforms first put Oregon on the health care map. The state’s newest developments, Coordinated Care Organizations (CCOs), have maintained Oregon’s reputation as an important laboratory for fiscally and socially responsible health care.

1980s—Statewide Dialog, Mobilization, and Action

Hard Choices and the Death of a Boy

In the early 1980s, Oregon began analyzing options to cover the uninsured and medically vulnerable in the state. Oregon Health Decisions, a nonprofit organization, formed the Citizens Health Care Parliament in 1983 to convene community forums across the state. The group issued policy papers focused on possible solutions (Brown, 1991). In 1987, the legislature passed a bill that refused to fund certain transplants under Medicaid: Because the cost of such procedures bought only marginal improvements in health to a small number of people, it was felt that Medicaid money could be better spent elsewhere. For instance, proponents noted that in 1 year, 1500 women on Medicaid could be provided with prenatal and delivery care for the same dollars that would cover projected 34 transplants to Medicaid beneficiaries (Thorne, 1990). The legislature opted to use limited resources to meet the needs of the many as opposed to the needs of the few.

Soon after this decision was adopted, Oregon landed in the national spotlight. A 7-year-old boy named Coby Howard contracted acute lymphocytic leukemia and needed a bone marrow transplant. His mother’s request that Medicaid pay for the transplant was denied and he soon died, causing an outpouring of outrage. By the time he died, Coby Howard had become one of the country’s most emotional and visible symbols of the debate over state decisions to limit Medicaid funding for transplants, wrote the Los Angeles Times (Japenga, 1987).

Goal Setting and the Oregon Health Plan

The national attention led Governor Neil Goldschmidt to appoint a workgroup in 1987 comprised of health care providers, insurers, businesses, consumers, labor representatives, and lawmakers that focused on three basic questions: (1) who should be covered, (2) what should be covered, and (3) how should the coverage be financed and delivered. The workgroup agreed that (Oregon Department of Human Services, Office of Medical Assistance Programs, 2006):

• All citizens should have access to a basic level of health care.

• Society is responsible for financing the care of poor people.

• The process must be based on criteria that are publicly debated, reflects a consensus of social values, and considers the good of society as a whole.

• The health care delivery system must encourage use of services and procedures that are effective and appropriate, and discourage overtreatment.

• Health care is one important factor affecting health; funding for health care must be balanced with other programs that also affect health.

• Funding must be explicit and economically sustainable.

• There must be clear accountability for allocating resources and for the human consequences of funding decisions.

Under the leadership of state senate president John Kitzhaber, MD, the legislature passed groundbreaking bipartisan legislation in 1989 that was collectively referred to as the Oregon Health Plan (OHP). Kitzhaber was the chief author of the legislation and is known as the intellectual father of Oregon’s reform efforts, and often seen as an once-in-a-lifetime leader in health policy. His early work as an emergency room physician and state legislator provided him great insight into society’s policy dilemma. He regularly treated uninsured patients who had been denied Medicaid coverage due to state budget cuts. Yet many of those patients were being seen in the emergency department with costly debilitating illnesses that could have been prevented with appropriate early intervention. This drove him to eliminate the inequities of insurance coverage while using a more transparent and rationale approach to establish the state’s Medicaid budget.

A central tenet of the OHP was the responsibility of both the private and public sectors to, in partnership, achieve near-universal coverage of more than 450,000 uninsured Oregonians. The critical features were that: (1) all persons with incomes below the federal poverty level would be eligible for Medicaid, (2) the Medicaid benefit package would consist of a prioritized list of diagnoses and treatments, (3) the legislature would draw a line on the list below which treatments would not be covered, (4) the legislature would not be allowed to reduce reimbursement rates to Medicaid providers, (5) Medicaid services would be provided through managed-care plans, (6) employers would be required to insure their employees, with the prioritized list as a basic benefit package, and (7) a high-risk pool would be created to serve those who were denied health insurance due to preexisting conditions (Bodenheimer, 1997).

Oregon’s Controversial Prioritized List of Services

In 1989, the legislature created an 11-member body to develop a prioritized list of services, an action The New York Times later labeled a brave medical experiment (New York Times, 1990). The Oregon Health Services Commission was tasked to define a systematic method for balancing medical outcomes and the social values attached to those outcomes against costs of the treatments—a process that was intended to result in all Oregon residents below the poverty line being covered, but for fewer services. The process was extremely open with nearly 50 community meetings, 11 public hearings, and a telephone survey to learn the values and preferences of Oregonians about prioritization of medical treatments (Brown, 1991). The Oregon approach to rationing, which simultaneously drew on public preferences and cost–benefit analyses, thus represented an unusual marriage of health services research and deliberative democracy, noted a review in the Canadian Medical Association Journal (Oberlander, Marmor, & Jacobs, 2001). The commission eventually established 17 categories of health conditions—ranging from potentially fatal, but treatable, acute conditions to others such as maternity and newborn services. All diagnoses and treatments were assigned to one of the categories and then ranked based on specific criteria, including life expectancy, quality of life, cost-effectiveness, and the number of individuals who might benefit from each treatment.

The Health Services Commission’s first list was completed in 1990 using an ineffective mathematical formula that included a net benefit value—it highlighted the expected outcomes of given treatments for hundreds of health conditions. The formula produced a list of 1600 condition/treatment pairs. The list was immediately dismissed as extremely flawed. For instance, crooked teeth received a higher ranking than early treatment for Hodgkin’s disease and dealing with thumb sucking scored better than hospitalizing a child for starvation (Fox and Leichter, 1991).

After significant revisions, the commission released a new list in 1991 that had been reduced to over 700 health services and treatment pairs and relied more heavily on public values and clinical judgment. The revised list was seen as more defensible, both medically and politically (Table 1.1).

Table 1.1

Example of 1995 Prioritized List

The five top items

Line 1. Diagnosis: severe or moderate head injury, hematoma or edema with loss of consciousness. Treatment: medical and surgical treatment.

Line 2. Diagnosis: insulin-dependent diabetes mellitus. Treatment: medical therapy.

Line 3. Diagnosis: peritonitis. Treatment: medical and surgical treatment.

Line 4. Diagnosis: acute glomerulonephritis, with lesion of rapidly progressive glomerulonephritis. Treatment: medical therapy, including dialysis.

Line 5. Diagnosis: pneumothorax and hemothorax. Treatment: tube thoracostomy or thoracotomy, medical therapy.

The five bottom items

Line 741. Diagnosis: mental disorders with no effective treatments. Treatment: evaluation.

Line 742. Diagnosis: tubal dysfunction and other causes of infertility. Treatment: in vitro fertilization, gamete intrafallopian transfer.

Line 743. Diagnosis: hepatorenal syndrome. Treatment: medical therapy.

Line 744. Diagnosis: spastic dysphonia. Treatment: medical therapy.

Line 745. Diagnosis: disorders of refraction and accommodation. Treatment: radial keratotomy.

Six items near the 1997 cutoff line

Line 576. Diagnosis: internal derangement of the knee and ligamentous disruptions of the knee, grade III or IV. Treatment: repair, medical therapy.

Line 577. Diagnosis: keratoconjunctivitis sicca, not specified as Sjögren’s syndrome. Treatment: punctal occlusion, tarsorrhaphy.

Line 578. Diagnosis: noncervical warts, including condyloma acuminatum and venereal warts. Treatment: medical therapy.

Line 579. Diagnosis: anal fistula. Treatment: fistulectomy.

Line 580. Diagnosis: relaxed anal sphincter. Treatment: medical and surgical treatment.

Line 581. Diagnosis: dental conditions (e.g., broken appliances). Treatment: repairs

Source: Adapted from Oregon Health Plan Administrative Rules [Bodenheimer, T. 1997. The Oregon Health Plan – Lessons for the Nation. First of Two Parts. The New England Journal of Medicine 337(9): 651–655].

Other Kinds of Insurance Expansion

Employer Mandate

The 1989 legislation also included provisions for extending insurance to working people. A mandate, with an effective date of 1993, was based on a traditional play-or-pay model and would have required employers with 50 or more employees who worked at least 17.5 hours to either provide health insurance or pay into a special state insurance fund that would offer coverage for their employees and dependents. However, as with all employer mandates, a federal exemption from the Employee Retirement Income Security Act (ERISA) was needed for its implementation. With no such approval, the employer mandate never went into effect and sunset in 1996.

The Oregon Medical Insurance Pool

The Oregon Medical Insurance Pool (OMIP) was an attempt to cover another group of uninsured Oregonians. It was established in 1987 and first began offering health insurance policies in June 1990. As the state’s high-risk health insurance pool, it provided insurance to Oregonians denied coverage because of preexisting health conditions as well as those who lost group coverage and did not have portability coverage. OMIP was overseen by a nine-member board made up of five representatives of the health insurance and reinsurance communities, a medical provider, two consumer advocates and the Oregon Insurance Commissioner.

To keep OMIP premiums generally affordable for the enrollees, the high-risk pool was structured to distribute claim and administrative costs between the enrolled members and the private insurance market. OMIP covered approximately 15,000 individuals on an annual basis. OMIP member premiums covered a little over 50% of the total program costs with the remaining costs (losses) recovered through assessments of Oregon health insurance and reinsurance companies based on people enrolled in Oregon. The need for OMIP ended with the implementation of the Patient Protection and Affordable Care Act in 2014.

Small Employer Health Insurance

In 1987, the legislature also established the Insurance Pool Governing Board (IPGB) to develop and offer health insurance plans to employers with fewer than 25 employees. To be eligible, an employer could not have provided health insurance for a period of 1 year prior to enrollment of their employees. The plans were not subject to state benefit mandates, initially included a declining state tax credit (nonrefundable and phased out in 1993) and were considered to have a lower cost than the regular market. It was overseen by a seven-member board comprised of representatives from the business and consumer advocate communities.

1990s—OHP Implementation—Challenges and Benefits

Explicit Versus Implicit Rationing

Oregon’s plan was to take the prioritized list and draw a line above which services would be covered and those below which would not. Not surprisingly, Oregon’s decision to cover only a specific number of diagnoses and treatments within the Medicaid population ignited a national debate on the rationing of health care. The state’s attempt to explicitly determine which services should be covered based on value and available resources was contrary to existing state and federal policies. At the time, it was perceived as pursuing contradictory goals—guaranteeing access to health care for all while also containing health care costs. However, Oregon leaders assumed that by having a more limited benefit package than traditional Medicaid, all Oregonians with incomes below 100% of the federal poverty level could be covered.

Senator Al Gore (TN) was one of the most vocal opponents to Oregon’s plan, along with the Children’s Defense Fund, Families USA, the American Academy of Pediatrics, the National Association of Community Health Centers, and the National Association of Children’s Hospitals. These groups believed that Oregon’s proposed system of rationing would hurt the most vulnerable groups in the state, mainly its poorest women and children. They argued that drawing a line to indicate acceptable services would force the state to only treat patients whose needs happen to be sufficiently cost-effective (Gore, 1990). Others would be left to pay their own way—or suffer the consequences of their illnesses. This would, in essence, create a two-tiered system with even more inequity (Leichter, 1999). Critics also noted that rationing was unnecessary since there was more to be done by eliminating administrative waste and striking better deals with drug companies and providers. In addition, since Oregon ranked 46th in Medicaid spending as a percentage of total state spending, opponents believed that, before rationing care, the state should first invest more money the way other states did (Gore, 1990).

Proponents of Oregon’s plan saw things differently. They observed rationing happening every day—although it was done implicitly. Hundreds of thousands of Oregonians were uninsured and had no access to health care. In fact, every state already limited the range of services provided to Medicaid patients and denied payment for all services to low-income individuals who were ineligible for Medicaid. Proponents argued that in a world of finite resources, including Medicaid budgets, it is morally irresponsible not to ration marginally beneficial services (Strosberg, 1992). Supporters highlighted that there were already three tiers of coverage—with the uninsured in the bottom tier.

Oregon Health Plan Goes Live

It is important to note that the Medicaid program is a joint state-federal program and any proposal to modify or eliminate services, change eligibility, impact beneficiary choice or change provider reimbursement requires federal approval. Thus, for Oregon to implement its new prioritized list, it would first have to receive approval from the Health Care Finance Administration (HCFA). This approval would be through a waiver under Section 1115 of the Social Security Act, which allows a state to modify its Medicaid program.

The early days of attempting to gain federal approval, Oregon’s request was met with barriers and skeptics. Oregon sent its first Medicaid waiver application to HCFA under the George H. W. Bush administration in 1991. Representative Henry Waxman (CA), the then chair of the Health and Environment Subcommittee of the House Energy and Commerce Committee, and Senator Gore were the two most outspoken opponents of Oregon’s waiver application. Senator Gore was quoted at the time as saying that Oregon is trying to play God by playing with spreadsheets (Brown, 1991). The combined influence of Gore and Waxman led to a denial in 1992 that cited possible violations of the Americans with Disabilities Act.

The Oregon Health Services Commission then further refined the prioritized list to better reflect the probability of death or disability with and without treatment. In addition, Oregon’s senators Bob Packwood and Ron Wyden were instrumental in gaining approval from the Clinton administration. In the spring of 1993, HCFA approved Oregon’s 1115 waiver to implement its new plan. In 1994, Oregon expanded Medicaid to include individuals under 100% of the federal poverty level, which provided a health care package via the prioritized list to 120,000 Oregonians in its first year. Due to this expansion, Oregon’s uninsurance rate fell from 18% in 1994 to 10% in 1998—an impressive achievement.

While the prioritized list provided some level of budget certainty, it did not fully pay for the Medicaid expansion. To help fund the early years of the OHP, the legislature in 1993 also increased state general fund expenditures and passed a ten-cent tobacco tax. The OHP was initially funded through line 606 of 745 possible treatments. As originally planned, the line was to move based on available funding. In 1995, the legislature funded to line 581 and to line 578 in 1997. In 1999, the legislature approved funding to line to 564—however, HCFA never approved the change.

Managed Care and Cost Containment

Managed care was crucial to keeping costs in line under the OHP. From the outset, the success of the OHP was contingent on enrolling beneficiaries into managed care plans to better manage and coordinate care, thus reducing expenses. Oregon has a long history with managed care dating back to the 1940s with the establishment of Kaiser Permanente. Over 85% of OHP enrollees were initially enrolled in one of 13 managed care plans. The initial plans were nearly all large commercial plans. This was short-lived as many commercial managed care plans did not have expertise or experience managing a more vulnerable and at-risk Medicaid population.

As the commercial plans exited, local independent practice associations (IPAs) mobilized to become the backbone of Oregon’s Medicaid delivery system. Most IPAs were formed during the early days of managed care in the late 1980s and early 1990s. IPAs allowed independent physician practices to come together and jointly contract with health insurers looking to partner with provider groups willing to take financial risk and manage care. This led to more local control in many areas and the development of community partnerships essential to managed care. The Oregon legislature eventually carved out a special place for IPA-like entities by allowing them to contract with the state to cover the Medicaid population without having to meet all the financial risk-based capital requirements of traditional insurers. The new organizations were called Fully Capitated Health Plans.

The Family Health Insurance Assistance Program

The Family Health Insurance Assistance Program (FHIAP) was established in 1997 after Oregon’s employer mandate did not receive the necessary federal waivers. FHIAP provided health insurance premium assistance to Oregonians who were not eligible for Medicaid and had incomes below 170% of the federal poverty level. FHIAP offered monthly premium subsidies to adults on a sliding scale, ranging from 50% to 95% of the cost of insurance. All children under the age of 19 were subsidized at 100% regardless of family income. The adult members’ monthly subsidies decreased as their income increased.

FHIAP offered members numerous health insurance plan choices offered by a variety of carriers throughout the state. The plans offered comprehensive medical benefits including prescription drug coverage, reasonable out-of-pocket costs, and a wide array of provider choice dependent on the carrier chosen. FHIAP contracted with five large domestic individual private market carriers in Oregon to provide plans, many of which were available statewide.

From its inception, FHIAP enrollment was limited by the amount of state and federal funds available. FHIAP provided subsidies to approximately 15,000 individuals annually and was generally closed to new enrollees and at times there were 40,000 to 50,000 people on a waiting list.

2000s—Policy Refinement and the Quest for Sustainability

Creation of OHP2

After John Kitzhaber’s tenure as senate president, he was elected governor in 1994 and reelected in 1998 for two terms that ran from 1995 to 2003. During this time, he focused on expanding and preserving the framework of the OHP. In 2001, through the leadership of Governor Kitzhaber, the legislature again looked to expand Medicaid coverage by shrinking the benefit package. This time the goal was to cover an additional 46,000 Oregonians by expanding Oregon’s Medicaid and FHIAP populations to 185% of the federal poverty level. The plan separated the OHP into two parts, OHP Plus and OHP Standard. OHP Plus covered categorically eligible Medicaid populations (such as pregnant women and children) and its benefit package would remain tied to the prioritized list. OHP Standard covered single adults, couples, and parents not eligible for Medicaid under federal regulations, but with a reduced package of services estimated at 78% of OHP Plus’s value. The OHP Standard benefit eliminated coverage for hearing, vision, some dental services, durable medical equipment, and nonemergency transportation (McConnell & Wallace, 2004). In addition, OHP Standard included copayments and increased monthly