In an effort to provide free medical care to more Oregonians, the state government implemented an innovative policy that provided fewer free Medicaid services to a greater number of people. This expansion of the state roster of Medicaid beneficiaries was accompanied by the refusal to cover some medical treatments, a move that generated controversy.
Health care in the United States it is not guaranteed for everyone. In the 1980’s, as the national policy debate on health care focused on the viability of a federally implemented universal health insurance plan, the state of Oregon developed its own unique answer to the modern health care dilemma. The state policy was not without its critics, for the plan provided coverage to more Oregonians while cutting the number of medical services offered to the public.
In the 1980’s, Oregon’s state senate chairman, and later governor, John Kitzhaber began to voice concern over rationing Medicaid services based on income rather than medical need. The federal government had initiated Medicaid in 1965 as a supplement to the Social Security Act. The purpose of Medicaid is to provide medical services to low-income citizens. Unlike Medicare, which is an entitlement program primarily for senior citizens, Medicaid participation is dependent on meeting a low-income requirement. Furthermore, unlike Medicare, Medicaid eligibility is not age-based, and it is jointly funded by the federal government and the individual states. All states participate in the Medicaid program on their own volition, and they strive to follow federal Medicaid guidelines in order to receive federal matching funds.
Two factors worked in tandem to create the environment in which Oregon would overhaul its Medicaid program in a way that no other state had done. First, Kitzhaber, himself a medical doctor, served as a policy entrepreneur in Oregon who put Medicaid on the state’s agenda. His persistent legislative effort was coupled with the tragic and highly publicized death of Coby Howard. Seven-year-old Howard was diagnosed with acute lymphocytic leukemia and required a bone marrow transplant to save his life. His family did not have the money for the procedure, and at the time it was not covered by state funding. Though some familiar with the case, including Kitzhaber, noted that Howard may or may not have recovered after a marrow transplant, the suffering child’s tragedy prompted a major policy change within the state.
Oregon was confronted with the difficult ethical question of how to allocate scarce health care resources in a manner that was both fair and economically efficient. In 1989, Oregon, along with other states, was operating under increasing budgetary stress. Despite this fiscal environment, the states were expected to continually provide funds to the state Medicaid budget. Essentially, there are four ways to cut the cost of Medicaid. States can reduce the reimbursement rate doctors receive for performing work for Medicaid patients, cut bureaucratic and administrative overhead, reduce the number of those eligible for benefits, or reduce the benefits given to those who are already on Medicaid rosters. It is difficult to lower physician reimbursement rates, as many doctors are already under fire for avoiding Medicaid patients. Cutting administrative overhead does not significantly shrink expenditures. Thus it was thought that there were two viable ways to proceed with significant Medicaid cost-cutting measures.
Federal law mandates that a certain portion of a state’s population receive Medicaid funding in order for the state to receive federal matching funds. Beyond that minimum, however, the states may provide Medicaid benefits at their discretion. Oregon, prior to the 1989 effort, generally limited the numbers of those who were eligible to receive benefits—a typical way that states respond to medical care budgetary limitations concerning the uninsured or underinsured poor. The result, quite obviously, is that there are millions of uninsured, lower-income citizens who do not meet a particular state’s standard definition of “poor.” To be clear, this definition, as long as the federal income minimum is met, varies from state to state.
Kitzhaber found the policy of determining medical care based on income unsettling. He proposed that all Oregonians should be covered, despite income, and that the increased cost of the expanded list of program beneficiaries would be met by cutting some services offered. Indeed, Kitzhaber argued that the Oregon health program should be based on cogent medical principles rather than arbitrary income levels. In effect, Oregon raised the income bar on Medicaid eligibility to everyone below the federal poverty level, rather than to the half who were mandated coverage under federal guidelines.
Initially, Kitzhaber’s idea was a normatively acceptable proposition to most Oregonians. However, the concept introduced a dirty word to the public arena—“rationing.” Under the old system, hypothetically an impoverished person might not be able to receive a needed service because they were not eligible for Medicaid; under the new system, a person might not be able to receive treatment because the procedure in question is not covered at all.
To tackle the difficult ethical decisions of which treatments to cover and which not to cover, Oregon solicited the input of its citizens by conducting both telephone surveys and town hall meetings. Critics pointed out that attendees to the town hall meetings were most often health industry professionals and were themselves rarely Medicaid recipients. Nonetheless, the state asked its citizens what values they thought should determine public funding of treatment. Oregonians placed the most importance on treatments “preventing death with full recovery” and comparatively little importance on treatments that “provided little or no improvement in quality of life.” Based on a working list of seventeen identified public values, the state Health Services Commission was established to rank “problem-treatment pairs,” which list medical ailments and their corresponding treatments.
Initially, 709 items were ranked by the commission’s eleven-member panel, with the public’s criteria in mind. The state legislature then drew a line, based upon budgetary considerations, after medical service number 587. If the patient needed a treatment above this line, they were publicly covered. Items below this line were not covered.
The Oregon Health Plan was not implemented until 1994. Its controversies and complexities took years for public policy makers and public health experts to sort out.
Innovative policy, particularly state health policy, bounded by the overarching federal system, is difficult to get onto the public agenda and even more difficult to pass and successfully implement. In 1989, however, Oregon began to do just that. The policy is not without its detractors, who find fault with having to tell a patient that a particular treatment is not funded. Proponents look at the policy as the best effort by a state to offer a baseline amount of health services to all citizens, despite income level. Universal health care remains a controversial issue and promises to remain so until a federal-level solution is developed.
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Bodenheimer, Thomas. “The Oregon Health Plan: Lesson for the Nation.” Parts 1-2. New England Journal of Medicine 337, nos. 9, 10 (1997): 651-656, 720-724. A look at Oregon’s reduction of the Medicaid benefit package. The first part outlines the Oregon program, and the second part raises questions about Medicaid in other states. -
Hunter, David J. Desperately Seeking Solutions: Rationing Health Care. Longman: New York, 1997. Brief volume tackles the issue at the root of the Oregon controversy—medical rationing. -
Strosberg, Martin A., Joshua M. Wiener, Robert Baker, and I. Alan Fein, eds. Rationing America’s Medical Care: The Oregon Plan and Beyond. Washington, D.C.: Brookings Institution, 1992. Edited volume that collects the ideas of attendees to a think tank discussion about the Oregon plan. Essays were written by politicians and physicians and reflect the controversies that were contemporary to Oregon’s initial legislative efforts.
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