Declining Federal Funds Under Medicaid Expansion Threaten Oregon Health Services

Money Burning

When states embraced Obamacare with either the creation of their own state exchange or the expansion of Medicaid with ‘free federal money’, they bought into a deal that in the beginning many legislators thought was too good to pass up.  But a few short years in, reality and the dates where federal funding declines inches ever closer. The bills are coming due for these expanded programs and ‘free money’ is in short supply.

In Oregon, lawmakers are seeing the writing on the wall and are concerned about how to deal with impending funding decreases.

Oregon’s expansion program, the Oregon Health Authority, has a $500 million budget hole “caused, in part, by a planned scale back of federal funding starting in 2017.” Representative Jim Weidner who is a member of the state’s Interim Committee on Health Care asked of the Authority’s CFO Mark Fairbanks, “With the declining federal dollars, how are we going to pay for this? What’s the plan going forward? Are we just going to shut everything down?”

Oregon’s Medicaid expansion flooded the system with nearly 400,000 new enrollees, compounded with the pre-expansion population, it’s a given that costs will continue to rise.

Federal funds for the Medicaid expansion population begin declining in 2017. And as Congress continues looking for ways to shore up its budget, those reimbursement rates to states may be on the chopping block. This will lead to even bigger deficits and a bigger tab for Oregon and their taxpayers – a tab that will total billions.

Representative Weidner warned of this outcome way back in 2012, saying:

“Ultimately, this program will have the states assume full responsibility. Why does this scare me? The current March 2012 general Fund budget is only $13.5 Billion. I just don’t see how we can generate the massive revenue required to fund even our portion of this program in 5 ½ years? We are already cutting vital services to a whole host of government assistance programs, we must ask ourselves how much will Oregon finally devote to paying for Health Care? We cannot include the All Funds Budget with Federal matching dollars because the cost shift will become the responsibility of the state and the % of diminishing return each year from the Federal government is only speculative after 2020. After 2020, we have no idea how much the State of Oregon will be forced to contribute.”

Many states have seen enrollment for Medicaid under Obamacare far outpace their initial projections.  States unlike the federal government cannot print money, and more people on Medicaid with less money from the federal government to pay for the additional costs will force legislators to make tough choices. Do they make substantial cuts to the original Medicaid population who are paid at a lower reimbursement rate, possibly stripping coverage from the truly vulnerable, or do they go after programs like public safety, transportation, or education to make up the difference? Higher taxes are also likely as lawmakers scramble to find state funds to pay for their Obamacare Medicaid expansion.

Chairman of Oregon’s House Interim Committee on Health Care, Mitch Greenlick said to Lori Coyner, the Oregon Health Authority’s director of health analytics, “I do not believe where you are going now leads us to a place where we can sustain transformation.”

Lawmakers across the country are beginning to face that same cold truth: Obamacare’s Medicaid expansion cannot sustain itself, and its increasing costs threaten to bankrupt many state budgets.


Kristina Ribali is the Senior Coalitions Director for The Foundation for Government Accountability.  Follow her on Twitter or reach her by email at [email protected]