In the late 1980s, former Governor John Kitzhaber was a chief architect of the Oregon Health Plan, the state’s reformulation of Medicaid. In 2012, he was the driving force behind another huge transformation: the creation of coordinated care organizations or CCOs, which became the way low-income Oregonians get their healthcare.

Kitzhaber has been out of office for 10 years now, but he has been paying a lot of attention in recent weeks to Congress, where Republicans are looking to trim upwards of $800 billion from Medicaid over the next ten years.

Kitzhaber spoke with OPB’s “Think Out Loud” about what Medicaid cuts or reform could look like for Oregon and the nation. Excerpts, edited for length and clarity, are below.

What an ideal healthcare system should look like

“The objective of the health care system ought to be health, right? And I think that, primarily, we view it as something to fund and deliver medical care, right? I think most of us would probably agree that we want a healthcare system that’s affordable, accessible and that actually improves health outcomes when people need it.

“You need to align the fiscal incentives with the outcomes that you want. So fee-for-service medicine, which is what most hospitals operate on, rewards you for doing more regardless of whether what you’re doing actually is connected to a health outcome. If you operate under a global budget that is a fixed amount of money that grows at a predictable rate each year, then you have an incentive to actually invest in, let’s say, childhood obesity, because you want to reduce the very costly consequences of diabetes downstream.”

How Oregon sets an example

“The Coordinated Care Organizations are essentially local organizations that operate on a global budget that can grow at about 3.4% per member, per year and are required to maintain enrollment and benefits and meet metrics around quality and outcomes. The idea originally was to prove that up in Medicaid and then move it into the private insurance market in the individual market and small group market, which I still think is a really important step because both Medicaid and Medicare and our employment-based system are simply unsustainable. They’re getting unaffordable for employers, for government and for individuals.

“We signed an agreement with the federal government that we would reduce the cost trend two percentage points from medical inflation by the second year of the waiver, but we had a period to phase that in and the feds gave us a $1.9 billion dollar one-time loan and that money went down over the five years as the cost savings came in.

“The classic block grant is they give you a fixed amount of money. And if the number of people in your Medicaid system goes up, then you’ve got to either drop some of them off or you have to cut benefits. The three classic ways to manage cost in any health care program is to reduce benefits, reduce enrollment or reduce what you pay providers. What we’re trying to do in Oregon is the fourth path, which is reduce the total cost of care itself, while maintaining access, while maintaining benefits, while maintaining quality.”

What cuts to Medicaid at the federal level could look like

“I think the Democratic response has been very loud and focused: ‘No cuts to Medicaid. Period.’ I think that’s not only the wrong response, but I think it misses a huge opportunity that’s presented at this moment in time.

“What I’ve been proposing and discussing with [Congressman Cliff Bentz] is using Oregon’s CCO model as a way to transform the Medicaid system nationally. We’ve saved the federal government almost $4 billion over the last ten years. Give other states the opportunity if they want to move down that path to adopt the key principles of our plan: a global budget that’s growing at a rate below medical inflation. Secondly, requirements: You can’t cut enrollment, you can’t cut benefits and you have to meet metrics around quality and outcomes.

“You can look at the $4 billion we saved as cutting Medicaid, or you could look at it as I do; as making the program more efficient and more responsive to the needs of people who depend on it. And actually ECOnorthwest did a study in 2018 on what would happen if the nation adopted a very similar program and received cost savings of the same magnitude as Oregon, and the 10-year budget reduction was about $700 billion.”

The potential political hurdles to get there

“One of them is on the Democratic side of the aisle. I think this attitude that [there should be] no cuts to Medicaid is politically not very smart. The last three election cycles, the Democrats have insisted that all our public institutions are working just fine, which doesn’t match up with the reality of millions of Americans who are working hard and can’t make ends meet, right? This is an opportunity for us to say, ‘Let’s defend the need for our public institutions – in this case, a healthcare program for vulnerable Americans – but let’s make it work. Let’s make it efficient. Let’s not continue to spend dollars on things that don’t produce health and simply line the pockets of big corporate interests.’

“On the Republican side, I question the motives of at least the president’s desire to cut these things. I don’t think there’s a lot of compassion there or understanding of the fact that these are hardworking people who are working one or two jobs and just can’t get by. And that healthcare to me, particularly in rural Oregon, is a key ladder to economic self-sufficiency. It’s part of the infrastructure of upward mobility. I’m not sure they understand that.

“I’ve been working closely with Congressman Bentz who has introduced this notion to the Committee on Energy and Commerce. Obviously, I don’t know what’s going to happen. But the question on the Republican side is whether they’re interested in just slashing and burning and cutting a program that is incredibly important to 80 million people, most of them kids in this country, or whether they’re actually interested in getting legitimate efficiencies without damaging this incredible infrastructure that’s so important to health.

“It doesn’t have to be an ugly partisan battle. We all need health care, no matter who we are, no matter where we live. Let’s work together to make it affordable and to make it effective.”

Former Oregon Gov. John Kitzhaber spoke with “Think Out Loud” host Dave Miller. Click play to listen to the full conversation: