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Pros And Cons Of Medicaid Reimbursement

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A key part of Oregon's complex system of Medicaid reimbursement is a "provider tax" big hospitals pay the state.

Davidson's group currently gets paid both by the state and by the large hospitals to help administer that tax.

Here's how it works: The state's 28 largest hospitals levy a 5.3 percent tax on net patient revenues. That tax generates about $550 million a year. The hospitals pay that tax to the Oregon Health Authority, which oversees the state's Medicaid programs. OHA then obtains a federal match.

The feds match Oregon's provider tax with nearly $3 for every Oregon dollar. That buys more health care for low-income residents.

"It's a very good deal for Oregon," says Janet Bauer of the Oregon Center for Public Policy, which has cheered …show more content…

The first is a contract directly with the Oregon Health Authority that pays the association $428,000 a year.

Second, and far more lucrative, is a private arrangement between the hospitals and the OAHHS that pays the association 1 percent of the tax collected. That's currently about $5.5 million a year and compensates the association for helping redistribute federal matching dollars to hospitals.

"Is it appropriate?" asks state Rep. Mitch Greenlick (D-Portland), chairman of the House Health Care Committee. "I don't know, but it's an awful lot of money."

Since signing the 1 percent contract in 2011, the hospital association has generated unusual wealth for a lobbying organization—it now has nearly $14 million in net assets, up from $4.9 million in 2010, records show. (Davidson's total compensation has nearly doubled since the contract went into effect, going from $673,000 in 2010 to $1.24 million.)

The association uses the money for a variety of purposes, including funding a political action committee. (Democratic lawmakers are pushing for strict limitations on political spending by groups that are primarily funded with Medicaid dollars. See sidebar, page …show more content…

Because the feds are reducing their overall contribution to Medicaid across the country, the Oregon Legislature is currently considering increasing the hospital provider tax to help make up the shortfall. Davidson's organization has reluctantly agreed to the increase.

As lawmakers grapple with a $1.4 billion budget deficit, much of which is Medicaid-related, they are examining every expenditure, including the hospital association's contract with the state.

That contract is on the chopping block, and as part of a current Medicaid funding bill in Salem, Oregon Health and Science University is pulling out of the agreement under which it pays the association 1 percent of the provider tax. That way it can participate in a more beneficial federal program for hospitals affiliated with medical schools.

To be sure, nearly 400,000 Oregonians have obtained health care coverage from the expansion of Medicaid, and hospitals have received a windfall because previously uninsured patients now have government insurance. OAHHS's help facilitating the Medicaid expansion is a good

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