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John Kitzhaber is going to Salem. “I’m on my way down to rain on the OHA bill,” he says from his car, driving from Portland and talking to WW via Bluetooth.
The legislation in question, House Bill 4003, is wonky—frankly, it’s a bit tough to even describe—but it’s no mystery why it has special significance to Oregon’s former three-term governor.
The bill is about how the Oregon Health Authority decides what services the Oregon Health Plan will pay for. If enacted, it would scrap references in state law to a feature that has set Oregon’s Medicaid system apart since Kitzhaber led its creation decades ago: the prioritized list.
The ordered list ranks the conditions and approved treatments that the Oregon Health Plan will reimburse medical systems to perform. (1. Pregnancy; 2. Birth of an infant. And so on.) It is bisected by a line at which the OHP will generally stop funding such services. (On the 2026 list, “471. Keratoconjunctivitis” just misses the cut.)
The system was limited somewhat by the feds in 2012. It is commonly understood as a means of rationing taxpayer-funded health care, but Kitzhaber emphasizes its coherent, systematic and public spirit.
“Oregon,” he says, “is the only state in the nation that has a transparent, public, evidence-based and accountable process to determine our covered benefits.”
He recalls the “aha moment” in the 1980s, when, working in an emergency room, he met someone who lost Medicaid coverage as a result of decisions Kitzhaber and other lawmakers had just made in Salem—then suffered a massive stroke after he stopped taking his pricey blood pressure medication.
Today, more than three decades after its creation, the Oregon Health Plan enrolls 1 in 3 Oregonians—largely through Medicaid, but through other programs as well; if you’re not on the plan, many of your acquaintances probably are.
As in much of the health care system, though, fast-rising costs and seismic federal funding reductions on the horizon make the status quo seem very, very unsustainable.
Thus, ideas are marinating. Bills are on the move. In this context comes HB 4003, which Kitzhaber beefs with on several grounds.
For one, he says, scrapping the prioritized list would cause great uncertainty about what is covered, creating a new administrative burden for already overburdened Medicaid administrators at a time when an estimated $8 billion loss of federal funds looms in coming years as a result of President Donald Trump’s One Big Beautiful Bill Act.
Moreover, Kitzhaber says, scuttling the list would hand OHA officials more power to shape benefits, further from accountability and public view.
Also, he believes the bill is not even necessary. The state, he says, can work out its differences with the federal Centers for Medicare & Medicaid Services without changing its law.
OHA leaders see things differently. The feds, they argue, say OHA must transition away from certain aspects of the prioritized list by Jan. 1, 2027, and that the state must update its laws. A spokesperson says that, even with the change, the state’s Health Evidence Review Commission would continue its “transparent, evidence-based work” developing coverage guidelines.
But the opinion of Kitzhaber, a longtime emergency room doctor and the father of the Oregon Health Plan, still carries weight in the Capitol, more than a decade after he cut short his fourth term amid allegations of influence peddling uncovered by this newspaper.
WW reached House Health Committee chair Rep. Rob Nosse (D-Portland) for comment after Kitzhaber rolled into Salem to “rain” on his bill. “My quote,” Nosse said, “is: Unfortunately for me, the former governor is still charming, and still very smart and convincing, and a bill that I think I need to pass to help OHA be a little bit more compliant with CMS’s requests of our state just got a little harder to pass.” (Nosse, speaking by phone, joked that he was delivering this remark “with a smile and a bit of admiration.”)
As Kitzhaber rallies support for the prioritized list—and his broad vision of the state’s health care future—he spoke with WW from the road in two interviews, which have been combined and edited for brevity and clarity.
WW: You say Oregon is the only state that has this process to determine covered benefits. Why do you think other states haven’t tried it?
Dr. John Kitzhaber: We ration health care all the time by income in this country. What we’re saying is that if we’re going to have to set limits, let’s do them explicitly, let’s be accountable for them, and let’s use evidence to make those choices. And that is pretty scary politically for a lot of people.
No one wants to ration, but if you don’t have enough money, you’re going to ration it either by dropping people or by cutting benefits or by cutting what you pay providers. That’s really the only three options you’ve got. We all do it. We’re just trying to do it openly.
Does House Bill 4003 have to do with financial strain on the Oregon Health Plan, or does it have to do with a wonkier debate over federal rules, or both?
I think there are people in the Oregon Health Authority who believe we can cover everything for everybody. And the fact is, we can’t. We can’t do it now. We have never been able to do it. And it’s going to be harder as we go forward. I think that’s living in a fantasy world.
Second, I think there’s this overconcern about compliance with the Centers for Medicare & Medicaid Services. I’m not saying we should defy CMS. But there is a process about which we can negotiate with the agency. There’s no reason this has to be rushed through in a 35-day session with one public hearing. That’s just not a public process.
I want to look at the broad sweep of the Oregon Health Plan. I understand it as having had distinct chapters—for example, the formation of the coordinated care organizations. How would you tell the story?
The genesis of it was in part the “aha moment” I had when I realized that the budgetary decisions we make in Salem actually have very real human consequences.
Then, in the next session, Oregon stopped funding transplants through the Medicaid program. It was pretty much unreported and uncontroversial. And a young boy, Coby Howard, showed up. His family was on Medicaid and he had acute lymphoblastic anemia.
His pediatrician applied for a bone marrow transplant, which the state no longer covered. It became headline news across the country. Larry King did a show on it. And Coby died. It’s questionable whether the transplant would have worked, but it was a human tragedy, and a very public one.
So the next year there was a motion made to partially refund the transplant program for, I think, eight people that had applications pending. And I was Senate president at the time and I opposed the motion.
It wasn’t that transplants don’t have merit—they do. The question was, “If we’re going to spend more money on healthcare, where should the next dollar go?”
The Oregon Health Plan was trying to say, look, if we have limited resources, how do we allocate those in a way that gives the greatest health benefit to the greatest number of people?
That was phase one. What we did not do in the Oregon Health Plan is challenge the delivery system to ask whether we can be delivering health care services in a more cost effective way.
That came about in 2011, when we had a $3.5 billion revenue shortfall—about $1.2 billion in Medicaid. If we went back to the pre-1989 paradigm, we either had to drop tens of thousands of people from coverage or cut provider reimbursement rates by around 40%.
Instead we said let’s redesign the delivery model. That led to the coordinated care organizations.
[CCOs administer Oregon Health Plan benefits and have incentives to manage global health care system costs. Many have reported great financial strain, and one recently left the system entirely.]
You know, the CCO model works. In the first five-year waiver, all the CCOs met their quality and outcome measures. Net savings over that five years was over a billion dollars.
Then what happened was, in the second contract period, the Oregon Health Authority in its wisdom made it a competitive bidding contest, which created a lot of disruptions in the CCO community.
And then they started treating CCOs like any other insurance company rather than what they were intended to be: locally designed and operated delivery models.
Their administrative burden has increased dramatically under current OHA leadership. They have to report on hundreds and hundreds of different reports each year. And they’re being asked to do a whole lot of things that are outside the parameters of clinical medicine. That’s one of the reasons they’re struggling.
I think we’re in a new phase now where—particularly with the federal funding cuts coming—there’s an opportunity to rethink the model and move back to what we were hoping it would be in the first place.
How can the Oregon Health Plan become a better version of itself now?
I have a group of hospital CEOs and insurance company CEOs and physicians that I’ve been working with for months.
And we delivered a set of recommendations for the governor yesterday. Our primary focus is the commercial market, but what happens in Medicaid has a huge impact on the commercial market.
We have a list of recommendations on Medicaid. Some of them are fairly controversial. We recommend that we try to significantly reduce the administrative overhead and reporting requirements—except for those that are absolutely necessary for patient care.
We said we should rethink health-related social needs [such as Medicaid-funded rental assistance]. Not because we don’t think they’re important. But facing an $8 billion revenue shortfall, we think that the Medicaid program should focus primarily on the access to clinical care. And the way that program is set up is extremely costly administratively.
We think we need to revisit what the core mission of Medicaid is, what the core Medicaid population is. Maybe consider different benefits for different populations.
This is really a math problem in a box. If you have unlimited demand and limited resources, you can either cut payment, cut enrollment, cut benefits, or reduce the total cost of care.
Ultimately, what we have to do is reduce the total cost of care, but that’s going to take a while.
In the short term, if you cut rates any more, you’re going to lose CCOs. Which means that we’ll go back to straight open card fee-for-service with no constraints on utilization, which would be chaos.
And that brings you down to benefits. We need to have a way to make explicit decisions around eligibility and benefits as we’re addressing the long-term cost dynamics.
The reason I’m heading down here to Salem today is, I think we’re going to really make that murky and make it really difficult to manage through what’s coming.
When you say we need to make changes to the way eligibility is determined, does that mean a smaller band of people is eligible for Medicaid? Or does it mean something else?
To me it would mean looking at where we have the ability to modify benefit packages but maintain coverage.
Top priority for the state is to keep as many people covered as possible.
The elephant in the room that no one wants to talk about—because it is very controversial and politically charged—is the Healthier Oregon Program, which is about $700 million per biennium, going to a billion, with no federal match. [Many HOP enrollees are undocumented immigrants.]
Maybe we should say, “We definitely need to cover these folks. During the next few years when we’re absorbing these kinds of budget cuts, maybe we make sure they have access to a good primary care benefit package and some kind of catastrophic backup.” Or at least have that conversation.
Which means what in practice? Right now, there’s this comprehensive Oregon Health Plan-style package for HOP. Maybe look at trimming that benefit package down to just the bare essentials?
Well, it’s a conversation we should definitely have. My biggest concern with what I believe is in HB 4003 is, we’re going to have no public, transparent, thoughtful evidence-based framework to have that conversation to make those changes.
It’s a very rich benefit package. It’s a much richer benefit package than those that are offered to most people enrolled in the small group market, for example [a regulated private insurance market]. I’m not saying that’s a bad thing. I’m just saying this is a math problem.
Our state has to operate on a balanced budget. So we should have a place to say, “Look, we want to keep as many people covered as possible. Where are the places we can make some adjustments to make sure that happens?”
Maybe it’s just a transition. Maybe it’s until we get through this fiscal crisis. And maybe in the meantime, we’ll have a parallel process to try to figure out how to bring the 25% or 30% of waste out of the system that doesn’t contribute to a health outcome.
