With big Medicaid cuts coming, healthcare leaders suggest big changes

Presenter: Oregon will lose $11.7 billion in federal Medicaid funding over the next six years. Healthcare leaders say we’re running out of time, and we need to start making big changes—now.

Speaking for the Health Systems Sustainability Group (HSSG) at the Oregon Health Forum Sept. 22,  former Oregon Gov. John Kitzhaber:

Gov. John Kitzhaber: Thank you all for joining us today. I want to start with just a couple of conceptual points.

First, the crisis in cost and access that’s overtaking our healthcare system here was decades in the making and clearly can’t be solved in the space of a two-year budget and legislative cycle.

So for that reason, taken together, the recommendations that you’re going to be hearing today offer a six-year, three-biennium strategy guided by the North Star policy vision that was adopted by the 2026 legislature about what we want our healthcare system to look like in 2033. And you can see that on the Foundation for Medical Excellence website.

Second, I think this is particularly important is, these recommendations should be viewed just as a work-in-progress. They’re a framework. They’re a starting point, if you will, for a serious effort to put Oregon’s healthcare system back on a more affordable and sustainable trajectory while we still have time to do so.

And so your input is really important to help us move this forward.

And finally, I want to just say, that time is not our friend here. The longer we wait to agree upon and begin implementing a strategy, a definitive strategy, the less we’ll be able to actually mitigate or avoid the serious human consequences of the fiscal crisis that’s bearing down on us.

So let me start by turning to the Health System Sustainability Group. It was made up of the CEOs of hospitals and health plans and insurance companies and physician leaders. The group has been meeting for over a year. And at the request of Gov. Kotek, we submitted a set of recommendations to the 2026 legislative session.

And on July 10, we submitted a set of recommendations for the upcoming session next year. We recognized that there is no one single cost factor driving the healthcare inflation problem that we’ve got. 

There are multiple factors and those need to be addressed in some kind of a balanced strategy.

What that means, and I think this is very important, is that this crisis can only be solved if we work together. It can’t be effectively addressed if all the stakeholders continue to operate within their respective silos.

In my view, it will take the active engagement and compromise from everyone from payers, providers, labor, business and healthcare consumers. So towards that end, these recommendations were organized around seven key areas that we have identified as major cost drivers.

Those are the lack of a strong primary care infrastructure; fragmented, ineffective behavioral health system; the cost of administrative, regulatory, and reporting overhead; the delivery system and payment model; labor and workforce issues; the cost of prescription drugs; and the lack of primary prevention.

The first two areas are particularly important primary care and behavioral health, and they have their own set of recommendations that will be presented by Betsy Boyd-Flynn and Ann Ford, respectively.

So the recommendations to ‘reduce costly administrative, regulatory, and reporting overhead that don’t add substantially to the value of patient care,’ both for CCOs and for the commercial market, are divided into two groups.

The first group represents recommendations that we think can be taken unilaterally by the executive branch, and those include a series of draft executive orders to implement those recommendations.

The second set are recommendations that will clearly require legislative action, specifically around three issues: the cost growth target, the hospital staffing law and the Healthcare Market and Oversight Program, or HCMO.

Now I think it’s important to know that the group recognized that these areas are controversial and that the report emphasizes that the concerns that are raised in the recommendations are not rejections of the policy objectives themselves, but rather concerns about the way these laws are being implemented, put into place, and interpreted.

So the recommendations essentially ask the governor to use the convening power of her office to bring together the affected parties to gain clarity and hopefully consensus around first, the policy goals we’re seeking as a state; secondly, whether the way these laws are being interpreted and implemented are achieving those goals; and finally, what modifications may be needed. 

The recommendations that are focused on changes to the delivery system and payment model are in two forms. The first one is to reduce clinical variation, which of course has cost associated with it as well as quality. 

And the second is to stabilize the individual and small-group markets in Oregon, both of which are on a very financially unsustainable trajectory, with the small-group market probably facing the greatest exposure to potential collapse.

Finally, the group identified three critical areas that we didn’t have the time or capacity to develop, and its recommendation is essentially for further discussion to bring these into the mix.

And there are three of those. One is reducing the cost and friction between payers and providers in the billing and claims adjudication process. One of them is reducing the cost of prescription drugs. And the third one is developing a methodology to better actually calculate the true cost of the care that we’re providing.

So let me simply close by saying that none of this is going to be easy. None of this is going to be quick. It’s going to require trust and it’s going to require collaboration. 

But I know we can do this. I know it because I’ve seen it before. I’ve seen (Oregonians) come together and do amazing things that nobody thought was possible. And we’re called upon to do that again today. And I’m confident that we will.

Presenter: After the presentations, the panelists took questions from those in attendance at the Oregon Health Forum.

OHF: From Rick Hangartner: Oregon Rep. Ed Diehl, former Republican candidate for governor who leads the Oregon Freedom Coalition, said on social media that he’s working on a different healthcare plan for Oregon. Gov. Kitzhaber, have you discussed the HSSG recommendations with him? Are you open to hearing his thoughts?

Gov. John Kitzhaber: I wasn’t aware that Rep. Diehl was working on this. I would welcome a copy. I’d love to engage you in this.

I’m not very ideological or rigid on this. I think all of us, at the end of the day, want a healthcare system that provides timely access to quality, affordable healthcare for every Oregonian in a system that is sustainable and financially stable.

And to do that, you need two things. You need to get the policy right and you need to get the policy through the politics. If you don’t get both of those things, you leave Oregonians where they are today, which is not a good place.

So yes, I would welcome his input. I would welcome input from anybody in Oregon on this. We don’t have a corner on the right thing to do. I think we know where we want to end up, and we need to stop arguing about means and reinforce and recommit ourselves to the end that we’re seeking.

OHF: And I think we can all understand that this question would come up and needed to come up. A number of people are asking: Why not a universal health plan? Why are we not recommending that? How is the HSSG work intersecting with the efforts to create a proposal around a universal health plan? 

Gov. John Kitzhaber: We certainly haven’t precluded that. Helen Bellanca, who is the chair of the Universal Health Governance Board, was on the HSSG. So they’re very aware of what we’re doing.

We obviously, when they get their final report out, which I haven’t seen yet, we’ll take a look at that. Obviously, we’d like to find a path forward that addresses some of the concerns and goals of that group.

As I mentioned, at the same time, I think we also have to recognize that just getting a good plan doesn’t necessarily solve the problem. We need to get the policy right and we need to get the politics. We need to get the policy through the political system. So with that caveat, as I said, we want to hear from them.

We have someone who’s very knowledgeable about what they’re doing on our group. And so we’re still waiting to see what they bring forth.

OHF: That’s helpful. And Gov. Kitzhaber, while we’re on it, another question was about the makeup of the HSSG, you know, how you decided who was there. One attendee expressed concern that perhaps there was not nursing representation, that it was more focused on doc(tor)s. I don’t know if you feel you can mention everyone who is on your group or how you decided. That would be helpful if you could give us a sense of that.

Gov. John Kitzhaber: Yeah, sure. I mean, the group basically was sort of created together. We got people who were willing to come in and have honest conversations and this was kind of a safe forum where we could have some of these conversations, particularly between payers and providers. 

There’s a list. If you look at the end of the HSSG report, there’s a list of all the people who’ve participated in it. It wasn’t meant to exclude anyone. It was meant to look at the major cost drivers in the system and try to, again, develop a starting point for the conversation.

And I do think that we need to remember that if any of this stuff gets into the governor’s recommended budget or is going to move through the legislature, obviously it’s going to be vetted through the broader public hearings process and public involvement process as it should.

So again, I just want to emphasize that this is a starting point. It’s incomplete. It will only get better with the more people who come to the table. 

But I also think we need to recognize that the only way we get this done, the only way we get past this crisis and beyond it is we’re going to have to all come together and compromise and work together and trust each other and have those difficult conversations in a very difficult fiscal environment.

OHF: One person has asked about the prioritized list, that it’ll increase administrative burden, with medical justification, all for eliminating care with no evidence or medical consensus. So can you speak to, really, the state of the prioritized list at this time?

Gov. John Kitzhaber: Well, I’d be glad to take a cut at it. I just fundamentally disagree that CMS told us that we had to get rid of it. I don’t think we’ve pushed back at all on that. It’s an invaluable tool, particularly at this point in time.

And I do think that if we begin to do—I call it horizontal prioritization, but look at the individual diagnoses and then put an evidence-based review on the various treatments for those diagnoses.

This is a time when we need to protect that tool. We’re the only state in the nation that has the ability to use evidence in developing the benefit package through a public, transparent, accountable process with an appeals process. And I don’t think we should let go of that without a fight.

Presenter: Leading the Medicaid Advisory Group, Dr. Bruce Goldberg:

Dr. Bruce Goldberg (Medicaid Advisory Group): You know, when I entered healthcare 40 years ago, I think healthcare was 8% or 9% of GDP. And we all said, ‘It’ll change when we get to 12%.’ 

Ten years later, it was 12%. We all said, ‘It’ll change when we get to 15%.’ Then 10 years after that, it was ‘15% will be the tipping point.’ 

We all said it would change at 20%. We’re at 20% now. Boy, I don’t know what the tipping point is.

Presenter: Former Oregon Gov. John Kitzhaber:

Gov. John Kitzhaber: I don’t know what it is either, but I have that same trajectory right and that same memory of when the tipping point is going to come. But I do think it’s going to come sooner than people think.

You know, there was a guy named Herb Stein who was the chairman of the economic development advisors for Nixon, who said—it’s now called Stein’s Law—’Things that can’t go on forever will stop.’

This system is based on two assumptions that no bookie in Las Vegas would ever take. One is that a nation with a $40 trillion national debt is going to continue to pump a couple trillion dollars a year from our children to maintain this healthcare system.

And the other one is that employers are going to continue to passively accept, you know, 15%, 20% year-over-year increases. It’s not going to happen. And we have a moment here in time when we can actually bring those players together and recognize the nature of what’s coming.

It’s not alarmist. It’s mathematics. And I think we’re very close. And I think Oregon has an opportunity to once again do something profoundly important. on this topic. 

OHF: As private equity firms take larger stakes in Oregon’s healthcare system, including buying up businesses at different points in the chain of care, like clinics, management companies, pharmacies, equipment suppliers, billing services, etc., how should the state make sure these investments don’t drive up costs, reduce access, or weaken care quality, especially for Oregon Health Plan members? What oversight exists today and where are the gaps?

Gov. John Kitzhaber: A little over my pay grade here, but I’ll throw in a couple of my two cents worth. 

I mean, I do think we’ve started with the corporate management of medicine bill that actually kept PeaceHealth down in Eugene from hiring an out-of-state ER firm.

So I think we’ve taken some steps. I do think it has to be expanded. We have to step back and ask ourselves, who else might fit into that category? 

This is going to get really controversial, obviously, particularly if you start to talk about hospitals, rolling them in, in terms of the number of physicians that are hired by hospitals.

But I do think we need to do it. To me, the litmus test is a private equity investor. And I don’t have anything against private equity in certain areas, but I don’t think that healthcare is one of those things.

The moral responsibility of a physician, of a healthcare provider, is to take care of that individual, take care of their health. The fiduciary responsibility of a private equity company is to maximize revenue for their investors. I don’t think they, as in general, really care about what happens long-term to Oregon.

And with this fiscal environment, it’s hard for me to justify sucking resources out of the Oregon healthcare system and sending them to a portfolio in some other states. So I think we ought to start with what we did and build on it.

OHF: What are the top three recommendations that the Health System Sustainability Group hopes will be adopted for 2027, and what are the next steps? What are the concrete plans to try to move things forward?

Presenter: Gov. John Kitzhaber:

Gov. John Kitzhaber: Well, again, I’m speaking for myself here, not for the entire group.

But my view would be (a) the regulatory relief that we talked about. I think that’s something that we can do. I think it’s low-hanging fruit. I’m not saying it’s easy, but I think it’s something that we can and should do.

Secondly, I think steps to try to stabilize the individual and small-group market are critical that they can’t wait. That’s going to cascade things further in the wrong direction if we don’t do that.

And then I think, the third one I’d put on the list would be to try to get certainly a strategy for a statewide PBM (pharmacy benefit manager) and begin conversations for a multistate public-private purchasing pool for prescription drugs.

I think it’s important to recognize that there’s no way we’re going to be able to avoid really hard choices. We’re going to have to make some investments in 2027 that may not show an ROI (return on investment) until 2031 or ’33, but we need to ask ourselves what’s going to happen if we don’t make those investments.

This isn’t just a healthcare crisis. This is a multibiennial general fund crisis that affects everything here in Oregon.

And you know, usually what you do in the legislature (and I’ve been there) is you fund acute problems at the expense of investments that could have prevented those problems in the first place. We have an opportunity to stop doing that in the ’27 session.

Presenter: That is former Oregon governor, Dr. John Kitzhaber, speaking at the Oregon Health Forum Sept. 22. He is president of The Foundation for Medical Excellence, and serves on Gov. Tina Kotek’s Health Systems Sustainability Group.