Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. Oregon Health Plan



Between 1989 and 1995, the Oregon Legislature passed a series of laws to reform the state health care system. These laws provided the basis for a major overhaul of the method of providing and paying for health care to Oregon's needy populations and the establishment of the Oregon Health Plan. A coalition including consumers and health care industry representatives undertook the weighty task of ranking health care procedures according to their public good. Those items deemed most beneficial are covered by the Oregon Health Plan. The Oregon Health Plan went into effect in February 1994 and enrolled nearly 120,000 new members in its first year. A high risk insurance pool is also available for those denied private coverage because of pre-existing medical conditions, with rates limited to a maximum of 125% of private insurance rates.


The Oregon Health Plan is available to all Oregon residents whose income is less than 100% of the poverty level. In addition, pregnant women and children ages 0-5 are eligible for services if their family income is less than 133% of the poverty level. All enrollees must be citizens or legal aliens who reside in Oregon. Coverage is also available to people who were refused health coverage by private insurers because of pre-existing medical conditions through the high risk pool.


The legislation enabling the Oregon Health Plan established an eleven-member Health Services Commission that was charged with the task of prioritizing health care services for coverage based on the benefit to the entire population of the state. The ranking of health services was conducted through an analysis that rated health services and treatment according to cost, duration of benefit, physician opinion on the effectiveness of treatment and prevention of death, and consumer opinions on the seriousness of specific health conditions. Coverage is provided for services above a certain threshold on this list. The exact threshold is determined by the legislature each year. All services frequently utilized by children have historically been covered.


Most individuals enrolled in the Plan are required to join a health maintenance organization; however, the frail elderly, the disabled, and certain others (approximately 1/5 of total enrollment) are permitted to receive services on a structured fee-for-service basis through a designated case manager.


The central principle of the Oregon Health Plan is that eligibility for publicly sponsored coverage can be expanded if costs are contained through managed care and prioritization of benefits. By increasing the number of covered individuals, it is expected that charity care and cost shifting will decline. The program is funded by the state general fund, federal match, and a newly-passed initiative raising Oregon’s tobacco taxes.