In the late 1980s, former Gov. John Kitzhaber was a chief architect of the Oregon Health Plan, the state鈥檚 reformulation of Medicaid. In 2012, he was the driving force behind another huge transformation: the creation of coordinated care organizations or CCOs, which became the way low-income Oregonians get their health care.
Kitzhaber has been out of office for 10 years now, but he has been paying a lot of attention in recent weeks to Congress, where Republicans are looking to trim upwards of $800 billion from Medicaid over the next ten years.
Kitzhaber spoke with OPB鈥檚 鈥淭hink Out Loud鈥� about what Medicaid cuts or reform could look like for Oregon and the nation. Excerpts, edited for length and clarity, are below.
What an ideal health care system should look like
鈥淭he objective of the health care system ought to be health, right? And I think that, primarily, we view it as something to fund and deliver medical care, right? I think most of us would probably agree that we want a health care system that鈥檚 affordable, accessible and that actually improves health outcomes when people need it.
鈥淵ou need to align the fiscal incentives with the outcomes that you want. So fee-for-service medicine, which is what most hospitals operate on, rewards you for doing more regardless of whether what you鈥檙e doing actually is connected to a health outcome. If you operate under a global budget that is a fixed amount of money that grows at a predictable rate each year, then you have an incentive to actually invest in, let鈥檚 say, childhood obesity, because you want to reduce the very costly consequences of diabetes downstream.鈥�
How Oregon sets an example
鈥淭he Coordinated Care Organizations are essentially local organizations that operate on a global budget that can grow at about 3.4% per member, per year and are required to maintain enrollment and benefits and meet metrics around quality and outcomes. The idea originally was to prove that up in Medicaid and then move it into the private insurance market in the individual market and small group market, which I still think is a really important step because both Medicaid and Medicare and our employment-based system are simply unsustainable. They鈥檙e getting unaffordable for employers, for government and for individuals.
鈥淲e signed an agreement with the federal government that we would reduce the cost trend two percentage points from medical inflation by the second year of the waiver, but we had a period to phase that in and the feds gave us a $1.9 billion dollar one-time loan and that money went down over the five years as the cost savings came in.
鈥淭he classic block grant is they give you a fixed amount of money. And if the number of people in your Medicaid system goes up, then you鈥檝e got to either drop some of them off or you have to cut benefits. The three classic ways to manage cost in any health care program is to reduce benefits, reduce enrollment or reduce what you pay providers. What we鈥檙e trying to do in Oregon is the fourth path, which is reduce the total cost of care itself, while maintaining access, while maintaining benefits, while maintaining quality.鈥�
What cuts to Medicaid at the federal level could look like
鈥淚 think the Democratic response has been very loud and focused: 鈥楴o cuts to Medicaid. Period.鈥� I think that鈥檚 not only the wrong response, but I think it misses a huge opportunity that鈥檚 presented at this moment in time.
鈥淲hat I鈥檝e been proposing and discussing with [Congressman Cliff Bentz] is using Oregon鈥檚 CCO model as a way to transform the Medicaid system nationally. We鈥檝e saved the federal government almost $4 billion over the last ten years. Give other states the opportunity if they want to move down that path to adopt the key principles of our plan: a global budget that鈥檚 growing at a rate below medical inflation. Secondly, requirements: You can鈥檛 cut enrollment, you can鈥檛 cut benefits and you have to meet metrics around quality and outcomes.
鈥淵ou can look at the $4 billion we saved as cutting Medicaid, or you could look at it as I do; as making the program more efficient and more responsive to the needs of people who depend on it. And actually ECOnorthwest did a study in 2018 on what would happen if the nation adopted a very similar program and received cost savings of the same magnitude as Oregon, and the 10-year budget reduction was about $700 billion.鈥�
The potential political hurdles to get there
鈥淥ne of them is on the Democratic side of the aisle. I think this attitude that [there should be] no cuts to Medicaid is politically not very smart. The last three election cycles, the Democrats have insisted that all our public institutions are working just fine, which doesn鈥檛 match up with the reality of millions of Americans who are working hard and can鈥檛 make ends meet, right? This is an opportunity for us to say, 鈥楲et鈥檚 defend the need for our public institutions 鈥� in this case, a health care program for vulnerable Americans 鈥� but let鈥檚 make it work. Let鈥檚 make it efficient. Let鈥檚 not continue to spend dollars on things that don鈥檛 produce health and simply line the pockets of big corporate interests.鈥�
鈥淥n the Republican side, I question the motives of at least the president鈥檚 desire to cut these things. I don鈥檛 think there鈥檚 a lot of compassion there or understanding of the fact that these are hardworking people who are working one or two jobs and just can鈥檛 get by. And that health care to me, particularly in rural Oregon, is a key ladder to economic self-sufficiency. It鈥檚 part of the infrastructure of upward mobility. I鈥檓 not sure they understand that.
鈥淚鈥檝e been working closely with Congressman Bentz who has introduced this notion to the Committee on Energy and Commerce. Obviously, I don鈥檛 know what鈥檚 going to happen. But the question on the Republican side is whether they鈥檙e interested in just slashing and burning and cutting a program that is incredibly important to 80 million people, most of them kids in this country, or whether they鈥檙e actually interested in getting legitimate efficiencies without damaging this incredible infrastructure that鈥檚 so important to health.
鈥淚t doesn鈥檛 have to be an ugly partisan battle. We all need health care, no matter who we are, no matter where we live. Let鈥檚 work together to make it affordable and to make it effective.鈥�