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The bill, previously passed by the House, will raise $600 million to help fund expanded Medicaid costs.

CAPITAL BUREAU - The Oregon Senate Wednesday passed the health care provider tax to help fund expanded Medicaid coverage. Previously passed by the House, the bill goes to Gov. Kate Brown for her signature.SALEM — The Oregon Senate Wednesday passed an assessment on health care providers and insurers that is expected to cover a chunk of the state's expected $1.4 billion budget gap.

The bill was previously passed by the House.

Its passage of the so-called provider tax is a significant milestone as the Legislature closes in on its finish date. It's expected to raise more than $600 million in revenue from providers over the next two years and draw down nearly $1.9 billion in federal funds to help pay for the state's Medicaid program.

The legislation increases an assessment on certain urban hospitals by .7 percent to 6 percent of a hospital's net revenue; creates a new assessment on rural hospitals; and places a 1.5 percent tax on insurance premiums.

The money is intended to cover the costs of the Oregon Health Plan, the state's Medicaid program, and the concept has the support of the state's hospitals.

Most, if not all, of the money collected by the assessment is returned to hospitals in the form of Medicaid payments.

The revenue-raising bill required a three-fifths majority vote, and all 17 Democrats in the Senate, plus three Republicans, including Senate Minority Leader Ted Ferrioli, R-John Day, voted for it, exceeding the required votes by two.

The bill was carried by both Republican Sen. Jackie Winters of Salem and Democratic Sen. Elizabeth Steiner Hayward, of Beaverton.

The proposal is not without controversy: State Sen. Jeff Kruse, R-Roseburg, called the bill an "important package" that did "need to pass," but he took issue with the structure of the taxes, including the 1.5 percent tax on insurance premiums.

"Here's the problem I have: we're doing bridge funding here," Kruse said. "We can assume in some point in time next year that Congress is going to make significant changes in Medicaid, and all this that we're doing may disappear. We don't know that. But at the end of the day what we'll still have is two new taxes."

The vote in Oregon comes as the U.S. Senate drafts what are believed to be sweeping changes to the Affordable Care Act, which dramatically expanded eligibility for Medicaid in Oregon and other states that signed on to the expansion.

The taxes are dedicated specifically to health care, but Kruse contended taxes are "fungible" and could be increased in the future.

Steiner Hayward noted that the assessment will sunset, at which point the Legislature needs to renegotiate it.

A family physician and member of a legislative work group that hammered out the proposal, Steiner Hayward said the tax on rural hospitals, at 4 percent of net revenue, was lower than the total 6 percent assessed on certain urban hospitals because legislators sought to "protect" rural hospitals, which were previously not subject to the assessment and, she said, have thinner margins.

Democrats have advocated for the legislation as a means of covering the costs of expanding Medicaid in Oregon under the Affordable Care Act.

"This bill will keep over 350,000 Oregonians from losing their health insurance," said Sen. Laurie Monnes Anderson, D-Gresham.

Ferrioli, the Senate Republicans' leader, said the provider assessment "may be the key vote of this legislative session, in terms of how we balance our budget and how we proceed in an orderly fashion out of this building."

"Often we face a choice of trying to do the greatest good for the most people, even though it can come with a downside," Ferrioli said. "Certainly, this bill has built into it a tax that I don't particularly like, and that's the one on insurance premiums. But it does have stuff that I know many Oregonians, particularly those who are needy, must have in order to maintain their access to healthcare, so on balance, I believe this is good public policy."

Ferrioli added that by voting for the legislation, he intended to counter the "narrative" that Republicans opposed new revenue measures and that they are "insensitive to people in need."

The legislation now goes to Oregon Gov. Kate Brown for her approval.

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