OFFICE OF THE DIRECTOR
Kate Brown, Governor

October 29, 2018

500 Summer St NE E20
Salem OR 97301
Voice: 503-947-2340
Fax: 503-9472341
www.Oregon.Gov/OHA
www.health.oregon.gov

The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
State Emergency Board
900 Court St, NE
H-178 State Capitol
Salem, OR 97301-4048
Dear Co-Chairpersons:
NATURE OF REQUEST
The Oregon Health Authority (OHA) requests receipt of this letter as its December
2018 Rebalance Report for the 2017-19 biennium.
AGENCY ACTION
Based on actual expenditures through July 2018 and updated projections based on the
Fall 2018 Caseload Forecast, OHA is projecting a $9.2 million General Fund savings
after netting budget challenges with savings and management actions.
While this net savings is relatively small, it is the result of the agency offsetting
significant challenges from across the agency—primarily in the Health Systems
Division and Oregon State Hospital—with significant savings in the Health Systems
Division. The General Fund challenges total $96.8 million, General Fund savings
total $101.1 million, and General Fund reductions from management actions total
$4.8 million. (Note: Rounded amounts do not exactly add to $9.2 the million
savings.)
Additionally, OHA is projecting a need to increase Other Funds limitation by
$1,055.5 million and Federal Funds limitation by $431.7 million.
The following table provides a summary of the OHA rebalance by General Fund and
Total Funds.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 2 of 12

Rebalance Changes
2017-19 Legislatively Approved Budget (LAB)
Challenges
Savings
Management Actions
Subtotal: Net Savings (Challenges – Savings & MA)

General Fund
$2,163,848,809
$96,804,916
($101,126,622)
($4,840,000)
($9,161,706)

Total Funds
$20,211,631,740
$1,281,417,213
$201,497,974
(4,840,000)
$1,478,075,187

December 2018 Rebalance
Percent Change from LAB

$2,154,687,103
(0.4%)

$21,689,706,927
7.3%

General Fund Challenges
OHA is identifying $96.8 million in General Fund challenges. Approximately, 84
percent of those challenges are within the Health Systems Division at $49.5 million
and Oregon State Hospital at $31.7 million.
Health Systems Division
Medical Assistance Programs Cost Changes ($28.9 million) – After updating its
budget models with projections through the end of the biennium and isolating the
impact of caseload changes, the Health Systems Division is estimating a net increase
in costs of $28.9 million General Fund for medical assistance programs. These costs
are driven by both an increase in budget need for coordinated care organization
(CCO) rates and for services paid on a fee-for-service basis, including mental health,
inpatient hospital, physician and other professional services. There is also increased
need based on projected payments to Federally Qualified Health Centers and Rural
Health Clinics. This challenge is mitigated with General Fund savings from revised
Medicare Part B projections ($18.1 million) and Medicare (Part D) clawback
projections and ($10.5 million).
Fraud Prevention Revenue Estimates ($11.0 million) – The 2017-19 budget
anticipated that OHA would recover an additional $15 million in Other Funds from
program integrity efforts. The Office of Program Integrity audits Medicaid claims,
identifies overpayments tracks fraud prevention, and identifies cost avoidance, which
are savings to the program by reducing or eliminating future costs. The $15 million
budget estimate was problematic because recoveries from provider audits are often
not received until the following biennium and those recoveries must be split between
the state share and federal share. Nevertheless, the office is engaging in new data
strategies to identify more areas for review and recovery.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 3 of 12

Tobacco Tax Forecast Decrease ($3.9 million) – The Medicaid and non-Medicaid
budgets are adjusted for the most recent Economic Forecast for projected tobacco tax
revenues. The new forecast indicates a $3.0 million decrease in revenue for Medicaid
and a $0.9 million decrease in revenue for non-Medicaid. OHA requests additional
General Fund dollars to offset the reduction in tobacco tax revenue in both budgets.
Community Mental Health Wraparound Services ($3.0 million) – Health Systems
Division is requesting a $3 million General Fund increase in Community Mental
Health funding to support individuals who are found to no longer meet medical
necessity criteria and denied ongoing Medicaid coverage for residence services. In
conjunction with a Medicaid State Plan approval, the Centers for Medicare &
Medicaid Services required the state to perform more stringent reviews for medical
necessity. The Health Systems Division secured a contractor to perform face-to-face
assessments. In some cases, individuals don’t meet the criteria and need to transition
to a lower level of care, but General Fund is needed to continue residential service
payments while an individual is working on moving to a lower level of care, which
can take some time in the current housing market.
Non-Medicaid Mandatory Caseload Forecast Increase ($2.5 million) – Updating the
Health Systems Division’s non-Medicaid mandatory caseload from the Fall 2017
Caseload Forecast to the Fall 2018 Caseload Forecast results in a $2.5 million
General Fund need. The caseload for the guilty except for insanity population
decreased by four clients. This would have decreased the budget by $620,003;
however, the caseload for civil commitment increased by 18 clients, which is an
increased budget need of $3,131,420. The result is a $2,511,417 General Fund need.
Behavioral Health & Clinical Support Service Staffing ($229,019 & 3 positions) –
The Health Systems Division is requesting two Operations and Policy Analyst 3
positions in Behavioral Health to perform work necessary for compliance with the
Oregon Performance Plan with the US Department of Justice. One position will be
dedicated to implementing a behavioral health quality improvement plan and process.
The second position will be focused on Assertive Care Treatment. The division is
also requesting a Medical Review Coordinator in Clinical Support Services. Current
staffing in this area is unable to meet the demand for prior authorizations and clinical
review with direct impact on Oregon Health Plan clients receiving timely health care.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 4 of 12

Oregon State Hospital
The Oregon State Hospital reports $31.7 million in budget challenges, but also
identifies $4.8 million in management actions. See Management Actions discussed
later.
Revenue Shortfall ($15.0 million) – The 2017-19 Agency Request Budget included
an increase for additional revenue from patient resources to cover the cost of care.
During the budget development process, an additional $10 million was added to the
planned increase. Delays in procurement of needed infrastructure, such as systems
and staff, has made this very aggressive increase unattainable, requiring a $15 million
General Fund backfill. Because of the progress made, however, the 2019-21 budget
assumptions for revenue do not need to be adjusted.
Increased Staffing Costs ($13.1 million) – The hospital is experiencing increased
costs related to increased patient acuity and more physician-ordered enhanced
supervision of patients, along with continued high nursing staff call out and longterm absence coverage. These additional staffing resource needs are typically funded
through staff vacancy savings throughout the hospital, but these savings have not
been sufficient to offset the increase nursing staff costs. A significant contributor of
increased costs is related to Senate Bill 469 (2015 session) and the requirement to
avoid mandating overtime, but still meet required nursing staffing levels. The
hospital has been forced to use staffing agencies to fill nursing needs.
Suicide-Ligature Costs ($2.0 million) – Federal awareness and new requirements for
suicide prevention required the hospital to make extensive facility and other changes
to mitigate risks for suicides. The changes were necessary for federal certification.
Increased Pharmacy Costs ($1.6 million) – Increased utilization of long-acting
injectable antipsychotics (LAIAs) has led to increased pharmacy costs in patient
treatment. The hospital is often able to provide LAIAs just prior to patients discharge
date, which increases the patients’ ability to adhere to their prescribed dose of
medication while transitioning to the community.
Health Policy and Analytics
Oregon Common Credentialing Program Suspension ($5.5 million) – In July 2018,
OHA made the decision to suspend the Oregon Common Credentialing Program. The
program had been running a cash deficit in anticipation of receiving fee revenue to
offset startup costs. Due to the suspension, there will be no revenue collected.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 5 of 12

This General Fund request is to offset the Other Funds cash deficit used to cover
startup costs up until the suspension of the program.
Public Health
Wallowa County ($129,511) – In April, Wallowa County Board of Commissioners
voted to transfer its local public health authority to OHA and cease all public health
activity on May 1, 2018. To cover the costs of providing ongoing public health
services in Wallowa County, Public Health needs $129,511 in General Fund dollars.
Mediation Costs ($35,172) – Public Health was unable to approve a certification of
need for Newco requesting to build a 100-bed inpatient psychiatric facility in
Wilsonville. Public Health needs $35,172 to cover the cost of mediation services.
Statewide Assessments & Enterprise-Wide Costs (SAEC)
Shared Services Funding, Facilities & Unemployment ($6.9 million) – The 2017-19
budget split between the Department of Human Services (DHS) and OHA was based
on past biennia cost allocation statistics. OHA has now seen the impact of
transitioning OHP Member Services to DHS in April 2018. With the transfer of many
Medicaid funded positions to DHS, the proportion of OHA cost allocation hitting the
General Fund has increased. Based on recent cost allocation results, OHA is
requesting $3.8 million General Fund for Shared Services Funding. OHA is also
requesting $2.0 million General Fund for the facilities budget and $1.1 million
General Fund for the unemployment budget within SAEC.
OHA Central
Treasury Loan Interest ($3.1 million) – Because there is a time lag between
expenditures and the receipt of Other Fund revenues budgeted in OHA, the agency
must obtain a treasury loan to meet its cashflow needs at the end of the biennium.
OHA estimates it will need to pay $3.1 million in loan interest.
Human Resources FTE Funding ($11,257) – The Office of Human Resources is
requesting $11,257 General Fund to increase two part-time positions to full-time.
General Fund Savings
OHA is identifying $101.1 million in General Fund savings—all within the Health
System Division.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 6 of 12

Oregon Health & Science University (OHSU) Quality and Access Program Increase
($44.3 million) – House Bill 2391 (2017 Session) excluded OHSU from the hospital
assessment program and required OHA to ensure that OHSU received at least 84
percent of the cost of providing services paid for, in whole or in part, with Medicaid
funds. In support of HB 2391, the Health Systems Division implemented a Quality
and Access Program in January 2018 to make qualified directed payments to OHSU
through CCOs. OHA funds the state of these qualified directed payments from the
intergovernmental transfer agreement with OHSU. The program is based on the
difference between average commercial reimbursement and Medicaid reimbursement.
OHSU’s recently updated program projections. Based on those updated projections,
the program will generate an additional $44.3 million in Other Funds revenue
available to offset General Fund dollars.
Fall 2018 Caseload Forecast Savings ($22.2 million) – Updating the Health Systems
Division medical assistance caseloads from the Fall 2017 Caseload Forecast to the
Fall 2018 Caseload Forecast resulted in a $22.2 million General Fund savings. While
the new caseload is slightly higher overall, some eligibility groups with higher permember-month costs—such as pregnant women and aid to the blind/disabled—had
caseload forecasts that decreased. See Attachment B.
Cover All Kids Caseload Savings ($17.3 million) – The Health Systems Division
estimates $17.3 million in General Fund savings from the Cover All Kids program.
Most of the savings are from updating the caseload projections. Enrollment has been
much lower than anticipated.
Insurers Tax Revenue Increase from CCOs ($16.7 million) – The Health Systems
Division is projecting an additional $16.7 million in Other Fund revenue to offset
General Fund dollars from the 1.5 percent premium assessment required in House
Bill 2391 (2017 session). Revenue projections were updated based on the quarterly
assessment payments received since implementation.
Safety Net Grant Recoupments ($0.7 million) – In the 2015-17 biennium, the
Legislatively Adopted Budget included $10 million General Fund for Safety Net
Grants. Grants agreements required community providers to return any unspent
dollars from their grant. The Health Systems Division has received $660,095 from 13
providers.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 7 of 12

Management Actions
The Oregon State Hospital is implementing three management actions to save $4.8
million in General Fund costs.
Nursing/Clinical Staffing Cost Reduction ($3.3 million) – The hospital is reducing
staffing costs through more effective interventions to address patient acuity.
Specifically, the hospital is evaluating the staffing associated with physician-ordered
supervision of patients.
Non-Payroll Cost Reduction ($1.2 million) – The hospital is reducing the spending in
discretionary services and supplies, such as limiting or eliminating travel and training
and delaying non-critical maintenance for the remaining months of the biennium.
Pharmacy Drug Cost Reduction ($0.3 million) – The hospital has implemented
strategies to lower pharmacy drug costs. Because of the increased utilization of
LAIAs, the hospital started participation in a drug replacement program in June 2018.
The program allows for the hospital to request LAIA manufacturers to refill two
more doses per patient, which cost between $1,500 and $2,260 per dose. The hospital
has also expanded the use of outpatient drug voucher programs, which allows
discharged patients to redeem vouchers at a pharmacy for prescriptions rather than
the hospital discharging the patient with a full set of prescriptions.
Limitation Request
Treasury Loan Limitation Request ($800 million) – OHA requests $800 million in
Other Fund limitation to borrow cash from Oregon State Treasury. Because there is a
time lag between expenditures and the receipt of Other Fund revenues budgeted in
OHA, the agency must obtain a treasury loan to meet its cashflow needs at the end of
the biennium.
OEBB Other Funds Limitation Request ($81.0 million) – The Oregon Educators
Benefit Board is requesting additional Other Funds limitation. OEBB open
enrollment ended in September. Final enrollment numbers will not be available until
December or January. Because of enrollment volatility, OEBB is requesting
additional limitation to finish the biennium.
PEBB Other Funds Limitation Request ($80.0 million) – The Public Employees
Benefit Board is requesting additional Other Funds limitation. PEBB fully insured
plans have increased enrollments, which caused the premiums to increase.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 8 of 12

Substance Abuse Disorder Federal Funds Limitation Request ($18.6 million) – The
Health Systems Division is requesting additional limitation to spend increased
Substance Abuse Disorder federal grant dollars.
Public Health Other Limitation Increase ($16.5 million Other Funds and $11.8
million Federal Funds – Public Health requests additional limitation for programs
and grants to spend available Other Funds and Federal Funds revenue. The request
includes position authority for nine positions at 2.50 FTE.
Health Care Incentive Other Funds Limitation Increase ($9.4 million) – Health
Policy & Analytics is requesting additional Other Funds limitation to spend revenue
for an agreement for OHSU to administer the Healthy Oregon Workforce Training
Opportunity (HOWTO) grant program.
OHSU Graduate Medical Education Limitation Increase ($7.3 Other Funds and
$14.5 Federal Funds) – The Health Systems Division is requesting additional Other
Funds and Federal Funds limitation to support Graduate Medical Education payments
to OHSU, which funds the state share of these Medicaid payments.
Insurers Tax Limitation Increase ($6.0 million Other Funds and $16.7 Federal
Funds) – The Health Systems Division is requesting additional Other Funds and
Federal Funds limitation to spend the increase in insurers tax revenue from CCOs.
Dual-Eligibles Correction Other Funds Limitation Increase ($5.5 million) – The
Health Systems Division is requesting additional Other Funds limitation for tobacco
tax funds carried over from the 2015-17 biennium to fund anticipated eligibility
corrections. The $5.5 million is the net amount the needed to pay the state share of
corrected payments after refunding the federal government its portion.
Oral Health HRSA Grant Limitation Request ($0.4 million) – Health Policy &
Analytics is requesting Federal Funds limitation and two positions based on federal
approval of an Oral Health Workforce Activities grant from HRSA. The request
includes position authority for two positions at 0.84 FTE.
On the next page is a table that a summary of the OHA Rebalance by fund type.

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 9 of 12

Summary of OHA Rebalance by Fund Type (in millions)
(Due to rounding, numbers may not add up precisely to totals.)
General
Other
Federal
Total
Fund
Funds
Funds
Funds

Challenges
Medical Assistance Cost Changes
OSH Revenue Shortfall
OSH Increased Staffing Costs
Fraud Prevention Revenue Estimates
Shared Srvcs. Funding, Facilities & Un.
Oregon Common Credentialing Program
OSH Ligature and Pharmacy Costs
Tobacco Tax Forecast Decrease
Treasury Loan Interest
Community Mental Health Wraparound
Non-Medicaid Caseload Increase
Behavioral Health/Clinical Services Staff
Public Health Funding Needs
OHA Central – HR Position Funding
Total Costs

Savings
OHSU Quality and Access Program
Medicaid Fall 2018 Caseload Forecast
Cover All Kids Caseload Savings
Insurers Tax Revenue Increase for CCOs
Safety Net Grant Recoupments
Total Savings
Management Actions
Reduce OSH Costs
Limitation Adjustments
Oregon State Treasury Loan
OEBB
PEBB
Health Systems Division
Public Health
Health Policy & Analytics
Total Limitation Increase
Net OHA December 2018 Rebalance

Need/(Savings)

$28.9
$15.0
$13.1
$11.1
$6.9
$5.5
$3.6
$3.9
$3.1
$3.0
$2.5
$0.2
$0.2
$0.0
$96.8

($44.3)
($22.2)
($17.3)
($16.7)
($0.7)
($101.1)

Need/(Savings)

$1.2

$0.0
($33.9)

$0.0
$150.6

$67.3

$72.2
$146.8

$219.0

($4.8)

($9.2)

1.14

0
3

0.36
1.14

$95.2
$124.6
($17.3)
$202.6

0

0

($4.8)

0

0

9
2

2.50
0.84

14

4.84

$178.3
$13.1
$4.2
$5.5
$3.6
$3.1
$3.0
$2.5
$0.3
$0.2
$0.0
$213.5

$0.0

$800.0
$81.0
$80.0
$17.7
$16.5
$9.4
$1,004.6
$1055.5

3

$149.4

($3.9)

$16.7
$0.7
$84.7

FTE

Need/(Savings)

($15.0)
($11.1)
($3.9)

Pos.

Need/(Savings)

$49.8
$11.8
$0.4
$62.0
$431.7

$800.0
$81.0
$80.0
$67.5
$28.3
$9.8
$1,066.6
$1,478.0

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 10 of 12

Risk Factors, Challenges and Outstanding Issues
OHA must continue to closely monitor the following for the remainder of the
biennium:
• While Oregon’s economy continues to improve, caseloads are always the
major driver of costs in the OHA budget. Small changes in the caseload
forecasts can have large impacts on the General Fund need.
• Tobacco tax revenue forecasts have historically fluctuated—increasing and
decreasing widely—affecting the tobacco tax revenue anticipated to fund the
Oregon Health Plan and community mental health investments.
• OHA is continuing its research and analysis into ongoing and emerging issues
reported to the Governor’s Office. As OHA resolves these issues, corrections
may have a General Fund impact.
ACTION REQUESTED
Acknowledge receipt of the OHA December 2018 Rebalance Report for the 2017-19
biennium.
LEGISLATION AFFECTED
See Attachment A.
Sincerely,

Patrick M. Allen
Director

Janell Evans
Budget Director

ENC: Attachment A – Legislation Affected
Attachment B – Caseload Forecast Changes
CC:

Linda Ames, Legislative Fiscal Office
Thomas MacDonald, Policy Budget Analyst, DAS/CFO

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 11 of 12

ATTACHMENT A
OREGON HEALTH AUTHORITY
DECEMBER REBALANCE ACTIONS
APPROPRIATION AND LIMITATION ADJUSTMENTS
DIVSION

Central Services/SAEC
Central Services/SAEC

PROPOSED
LEGISLATION/
SECTION
Ch. 545 1(2)
Ch. 545 2(2)
Ch. 545 4(2)

FUND

REBALANCE
ADJUSTMENTS

APPR #

General
Other
Federal
Total

$10,270,769
($3,902,097)
$1,098,487
$7,467,159

87401
34401
64401

GF – Debt
OF – Debt
FF Debt NL
Total

-

85801
35802
63801

-

34402

Debt Service

Ch. 545 1(4)
Ch. 545 2(5)
Ch. 545 5(2)

Shared Services

Ch. 545 2(3)

Other

Ch. 545 1(1)
Ch. 652, section 4
Ch. 545 3(1)
Ch. 545 2(1)
Ch. 545 2(4)
Ch. 545 4(1)

General
GF – SB 558
Lottery
Other
OF Cap Imp
Federal
Other PEBB
Revolving Fund
Other OEBB
Revolving Fund
Other, PH NL
Federal, PH NL

($2,168,720)
($17,263,755)
$898,444,435
$430,596,068

87801
87819
44801
34801
34811
64801

$80,000,000

34804

$81,000,000
-

34805
32801
62801

Total

$1,470,608,028

OHA Health Services
Programs

Ch. 545, section 6
Ch. 545, section 7
Ch. 545 5(1)
Ch. 545 5(1)

 The Honorable Senator Peter Courtney, Co-Chair
The Honorable Representative Tina Kotek, Co-Chair
October 29, 2018
Page 12 of 12

ATTACHMENT B

Fall 2018 Medicaid Caseload Forecast
2017-19 Fall 2017 Forecast Compared to Fall 2018 Forecast

Eligibility Category
Affordable Care Act (ACA)
Parent/Caretaker Relative
Pregnant Women
Children's Medicaid Program
Aid to Blind and Disabled
Old Age Assistance
Foster/Adoption/BCCP
Children's Health Insurance Program
Non-OHP (CAWEM, QMB)
CAWEM Prenatal
Other Non-OHP (Part A & B Premiums,
Clawback)
2017-19 Total

Impact of Fall 2018 Caseload

17-19
Caseload at
Fall 2017
Rebalance

17-19
Caseload at
Fall 2018
Forecast

Difference

Problem/
(Savings)
Total Funds in
Millions

Percent
Change

344,382
72,342
11,811
303,347
84,819
45,514
21,243
82,637
64,423
1,779

356,589
73,906
10,428
306,435
84,321
45,499
20,694
84,163
63,378
2,062

12,207
1,565
(1,382)
3,088
(498)
(14)
(549)
1,526
(1,045)
284

3%
2%
-13%
1%
-1%
0%
-3%
2%
-2%
14%

$169.7
$23.2
($48.5)
$0.1
($17.4)
($2.8)
($7.5)
$7.6
($0.6)
$9.2

133,772

132,394

(1,377)

-1%

($8.4)

1,032,296

1,047,476

15,180

1%

$124.6

FF
$146,826,662

TF
$124,606,817

GF
($22,219,845)

OF
-