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Oregon Health Policy Board (January 18, 2011)

Thanks very much for having me again – I’m legitimate this time, which may be good or bad depending on whose perspective.  I thought I’d give you an update about where we are with the budget, which is the overriding challenge that we face here in Oregon other than getting the private sector economy back on its feet.  And the implications and opportunities of that budget crises for some significant changes not just in healthcare but I think in the whole enterprise of public education and really across the board. 

As you know, this last budget was propped up with about $1.3 billion of one time revenue, a lot of that from federal stimulus but in the case of healthcare – the tail of the provider tax, tobacco tax, and a number of other things.  Most of our stimulus went to Oregon health plan and into the state school fund.  So those are the two areas that are hit most profoundly by the loss of those revenues.  

I’ve tried to change the budget process, or take the first step in changing Oregon’s budget process to move from what used to be called the current service level budget where you take the spent last year and then inflate it by a number of factors and that’s the starting point for next year. 

The problem is that a lot of the money that’s in that current service level budge just simply isn’t coming back.  So I’ve asked the budget management department to create a baseline budget with the general fund and the lottery fund that we know we have going forward so it’s a very clear starting point based on real revenues that we can expect.  So in the case of the state school fund, just to let you know that you’re not out there all by yourselves, the state school fund is about 32% of the general fund – it’s a big chunk – that’s the K-12 appropriation.  And I think what most school advocates would argue is that we need just around $5.7 billion over the next biennium to maintain some semblance of a system of public education.  

Under this methodology, it comes out just a little under $5.4.  We’re trying to figure out how we manage through that.  We are going to have some revenue growth – about 9% revenue growth in this biennium, which will produce about $1.2 billion.  So the question that we have to ask ourselves is, how we reallocate that back in a way that makes sense, but also that doesn’t just prop up the current budget and kick the can down the road, but how do we use that to actually begin to transform systems to make them more efficient and cost effective in the future.   

In healthcare, if you combine the Oregon Health Plan and long term care services, you need about $1.2 billion to maintain the levels of services you have right now.  Now that takes into account the lost one time revenues plus a significant increase in enrollment in the Oregon Health Plan which is directly related to the economy.  If you pencil that out, that’s just under a 40% reduction, so that’s the biggest hit of anybody– the second biggest being the state school system. 

So the challenge is, how do we take some of those resources we know, in terms of revenue growth, apply them back here, of course we have to use these for a number of other things. And then how do we begin to change the way we deliver care?  I think all of us know that all things being equal, we can deliver health care in America a lot more cheaply a lot more effectively and get better outcomes but it would require a different delivery system. 

The opportunity for us, instead of just doing less of the same, in hopes that when the economy comes back we can do more of the same, is to actually try to do things differently.  So the group that we put together under the leadership of Mike and Bruce – and it was kind of a disparate group of stakeholders involved and providers and consumers – the approach they’ve taken is to try to manage through the first year of the biennium, recognizing that there will be benefit changes, that there will be reimbursement changes – significant ones – in the first year of the biennium.  Then put in place a design effort to change the way we deliver services in the second year of the biennium, starting July 1, 2012, to recoup those cuts by a more efficient delivery. 

We recommend that we start with the Oregon Health Plan and the dual and triple eligibles.  That’s about 500,000 people.  Now I want to make it clear this in no way seeks to derail the good work you’ve been doing on a much broader level.  It’s just, how do we stage this in a way that makes sense? And we do have to deal with this population because they’re the direct responsibility of the state of Oregon. 

And so the idea is to focus on that population; to try to create incentives and pathways for better integration of physical health, mental health, long term care, dental health – to try to create regional delivery organizations. 

We’re looking at least initially at hospital referral areas, logical catchments areas for care provision.  This will require significant federal waivers.   I’ve talked to Secretary Sebelius and also Don Berwick and I think they’re very interested in working with us very early on because some of these we have to have probably by June to proceed.  The second phase of this, which would be down the road in the beginning of the next biennium, would be to bring in public employees into this net, this system and then try to make it available to other lines of businesses in the state Oregon.  So I don’t want to suggest this isn’t going to be a real heavy lift, and I think the worst thing that could happen is if we tear each other apart as stakeholders in the first year because this isn’t going to get any better unless we change the system. 

We truly are in this together.  I think if we do it together, and if we do it right, this could be profoundly positive for Oregon and really provide a light at the end of the tunnel for how healthcare is delivered certainly in this region and probably around the country.   So, what I’d like to do is figure out a way to make this mesh with the good work of Oregon Health Policy Board and what I’m recommending is that we create a design team that’s chartered by the Health Policy Board that would begin this design work immediately with some fairly challenging timeframes to produce a product. 

We need some level of detail in order to seek the waivers that were going to need from the federal government.  And then, as you know, Mike has agreed to serve as my health policy advisor on this issue so he has a foot in both camps, if you will, so I think the lines of communication should be very good. 

I’m very excited about this and I think you should be too.  I’d like to come back here a year from now and congratulate ourselves on really getting out in front and leading the way. 


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