New Taxes Will Make Health Care More Expensive in Oregon

New Taxes Will Make Health Care More Expensive in Oregon
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Oregon voters recently upheld a myriad of new taxes that were passed as part of a major health-care law last summer. The state government is planning to use the estimated $320 million in revenue to cover hundreds of thousands of residents who have enrolled through the Affordable Care Act. The outcome of this vote has serious implications anyone enrolled in a health-care plan in Oregon.  

The referendum was on sections of House Bill 2391, which imposes a 0.7 percent tax on small hospitals as well as a 1.5 percent on individual and family health-care premiums. These revenue raisers are intended to generate more tax dollars for the state. But they also allow Oregon to receive $630 million to $960 million in federal Medicaid matching funds.

While proponents of the 1.5 percent tax on premiums argue that some Oregonians will benefit from expanded Medicaid coverage, the tax is expected to raise the cost of care for over 1.2 million people enrolled in the health-care market. This includes the 12,000 college students who buy their own health care as a requirement of attending public schools, small businesses, school districts, and even non-profits. (Lawmakers permitted certain exemptions for union organizations and major corporations headquartered in Oregon, such as Nike.)  

Economists have noted that the taxes in this law will raise the Silver Affordable Care Act plan by about $625 in 2019 compared to 2018. Far too many in Oregon are already struggling with the high cost of health care. Unfortunately, this law will only exacerbate the problem, rather than bringing down the cost of care.

In addition to taxes on individuals, hospitals will be forced to shell out more money to the state. When firms are required to pay more in taxes, it leaves less capital for readily available things, such as essential services or new equipment, and a smaller budget for doctors and nurses. Moreover, as is the case for most taxes, this tax will be passed on to consumers in the form of higher costs. Trips to the emergency room, childbirth, and surgeries are all at risk of being hit with this new tax on hospital services. The result? Low and middle-income families seeking care will be whacked with higher deductibles and premiums. 

Unfortunately, these taxes are a done deal. But lawmakers and administration officials in Salem should still focus on reforming the waste within the Medicaid program. A recent audit by the Oregon Health Authority found 55,000 people were enrolled in Medicaid even though they were not qualified. The Authority determined that each of these enrollees cost the state, on average, $430 per month, or $280 million per year. These savings alone could pay for the legislature’s tax increases. And this is just one example of the state’s inability to spend taxpayer dollars in an efficient manner. 

Other audits and reports from the last two years indicate that the state overpaid $74 million to health-care organizations in an effort to expand Medicaid coverage to residents. Perhaps the most concerning use of taxpayer funds was the $300 million wasted on the Cover Oregon website, which failed to sign up a single individual for health insurance. Such misuses of precious taxpayer funds are unacceptable; greater transparency must be required moving forward. 

To be sure, all taxpayers and patients will pay for these new taxes. But middle-class families will surely bear the brunt of it. It’s bad enough that premium costs here have increased by double digits nearly every year since Obamacare passed in 2010. Over the last three years, many Oregon insurers have closed their doors or simply pulled out of the Oregon market, reducing options for tens of thousands of people.

If policymakers want to get serious about reducing the cost of health care while also covering more people, they should try empowering individual consumers, not taxing them.

Thomas Aiello is Policy and Government Affairs Associate at National Taxpayers Union.

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