Oregon Will Pay More Per Medicaid Member in 2027; Rates Exceed Approved Budget for Third Straight Year

Oregon — Oregon will increase payments to the organizations managing most Oregon Health Plan benefits in 2027, as rising treatment costs, changes in covered services and new federal eligibility requirements reshape the state’s Medicaid program.

The Oregon Health Authority announced Oct. 19 that its 15 coordinated care organizations, or CCOs, will receive an average increase of 6.1% per member per month when maternity payments are excluded. Including maternity payments, which received a temporary boost in 2026, the increase is 5.6%.

The statewide average will reach $627.68 per member per month, including maternity payments. OHA says the higher rates will support financial stability and continued access to care for a program covering approximately 1.4 million Oregonians. The proposed rates await federal approval, which the agency expects by year’s end.

But the state’s 157-page draft rate certification report shows that the increase reflects more than medical inflation. It incorporates assumptions about patients losing or cycling through coverage, shifts in the health needs of those who remain enrolled, administrative expenses and changes in how Oregon pays for particular services.

The result is a financing plan intended to cover anticipated costs, with several important assumptions that will need to be tested against actual enrollment and spending.

“Our updated 2027 rates support the financial stability of the coordinated care organizations that help us deliver Medicaid benefits across the state,” OHA Chief Financial Officer Rochelle Layton said in the announcement.

The higher rates also create pressure on Oregon’s Medicaid budget. In its Sept. 1 presentation to the Oregon Health Policy Board, OHA said capitation rate increases exceed legislatively approved budget assumptions for the third consecutive year, requiring additional legislative funding. The agency said it retained higher minimum requirements for the share of CCO revenue devoted to health care to help ensure the additional funding supports member services.

CCOs receive predetermined monthly payments to coordinate medical, dental and behavioral health services. Those payments vary by eligibility category, health risk, geography and other factors. The announced increase applies to government payments to CCOs; it does not establish a corresponding increase in premiums charged to OHP members.

The $627.68 figure also requires context. The certification’s comparison excludes Oregon’s managed care organization tax, quality incentive payments and certain separately funded payments to providers. It is therefore not a complete measure of Medicaid spending per person.

Nor does the 5.6% increase mean total state Medicaid expenditures will rise by that percentage. The comparison uses projected 2027 enrollment to weight both years’ rates, helping isolate payment changes from changes in the mix of people covered. Actual spending will also depend on enrollment, separate payment programs and the division of costs between state and federal funding.

The certification covers Medicaid and Children’s Health Insurance Program rates. It excludes the separately rated Healthier Oregon program and OHP Bridge’s Basic Health Program.

Higher payments follow substantial financial pressure on Oregon’s Medicaid delivery system.

According to OHA’s August financial update, CCOs collectively recorded $67 million in operating profit in 2025, producing a 0.8% margin. That was an improvement from approximately break-even results in 2024, although performance varied considerably among organizations.

The improvement followed $149 million in additional public funding, including $30 million in state general funds and $119 million in federal funds. CCO spending on member services increased 9% in 2025. Hospitals accounted for 31.8% of member-service spending, while mental health and substance use disorder services accounted for 22.5%.

Preliminary results through March 2026 showed a collective operating margin of 1.7%, suggesting that higher payments were improving finances. Those early results do not establish how organizations will finish the year.

The new certification, prepared by Marsh Government Health Consulting, identifies mental health, prescription drugs and physician services as drivers of higher average costs for Medicaid expansion adults.

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It also reports some moderation. Overall annual cost-trend assumptions are lower than those used for 2026, partly because inpatient hospital costs appear to be stabilizing and certain high-cost drugs have been removed from CCO responsibility. Higher outpatient hospital and behavioral health trends offset part of that improvement.

Moving a drug or service outside managed care changes where its costs appear. That financing change alone does not demonstrate an equivalent reduction in the cost of providing care across Medicaid.

Federal eligibility changes introduce another source of uncertainty.

The report’s eligibility analysis anticipates community engagement requirements for certain Medicaid expansion adults beginning in January 2027. It also incorporates six-month eligibility reviews for certain expansion members beginning Oct. 1, when Oregon’s current waiver authority expires.

The model anticipates fewer new entrants, additional coverage losses and more enrollment gaps. It also assumes that some people returning after a gap will have higher monthly costs because care was deferred.

These changes can increase average spending per covered member even as enrollment falls. If people with lower average treatment costs leave coverage, those remaining can represent a more expensive population to insure.

To account for the anticipated shift, the report increases projected physical and behavioral health benefit costs for expansion adults by between 2.8% and 3.2%, depending on age. Those adjustments are components of the rate calculation, not additional increases to be added to the announced statewide percentage.

OHA and its actuaries plan to revisit the assumptions in 2028 using actual 2027 experience. Payments could be adjusted upward or downward depending on how the remaining population’s health needs compare with projections. The report states that these retrospective adjustments may change total statewide payments.

Maternity funding moves in the opposite direction.

The average maternity case rate falls 12.8%, from $16,353.38 in 2026 to $14,259.21 in 2027. Unlike ordinary monthly capitation, maternity case payments are tied to qualifying maternity events.

The certification attributes much of the decline to the expiration of a temporary reimbursement assumption for hospitals paid through diagnosis-related groups. For those maternity events, the calculation returns to 80% of Medicare reimbursement from the legislatively funded 104% assumption used in 2026.

That temporary support was part of a maternity stabilization initiative announced in January. The initiative included $15 million in state general funds for smaller rural hospitals and $10 million, supplemented by federal matching funds, for larger hospitals through CCO rates.

The declining case rate does not establish that maternity benefits are being eliminated. It does show that an overall increase in CCO payments can coexist with a substantial decrease in one payment category.

Changes also vary widely across patients and regions.

Statewide rates for expansion adults ages 19 through 34 rise 9.6%, compared with 4.8% for children ages 6 through 18 and 0.5% for children in adoptive, substitute or foster care. The separate youth-with-special-health-care-needs category declines 4.1%, which the report attributes to using newly available experience from the population actually enrolled.

Excluding maternity and the managed care tax, Eastern Oregon CCO’s average rate rises 10.6%, Yamhill Community Care’s rises 10.2%, and Jackson County CCO’s rises 1.9%. These differences reflect the rate-setting model’s treatment of member risk, regional costs and hospital arrangements; they do not by themselves measure organizational efficiency or quality.

The rates also incorporate Oregon’s January 2027 Benefit Update Project, which aligns coverage with Medicaid State Plan benefits, along with changes affecting particular treatments and youth behavioral health services.

In its September presentation to the Oregon Health Policy Board, OHA reported CCO concerns that benefit-change costs could be understated. Rural organizations also questioned their ability to reduce preventable emergency visits and hospital admissions where alternatives to hospital care are limited.

The certification nevertheless builds in expected efficiencies. Its adjustments remove $15.3 million associated with potentially avoidable emergency department use and $22.6 million associated with potentially preventable hospital admissions from the 2025 spending base used to develop rates. These are reductions in modeled costs, rather than verified savings already achieved.

Administrative allowances range from 7.8% to 9.8%, with higher percentages for smaller organizations. The calculation also includes a 1.75% underwriting margin to account for financial risk and capital needs. That allowance does not guarantee an actual profit.

Spending safeguards require CCOs to maintain minimum medical loss ratios of 86% to 87%, depending on organizational size and subject to applicable adjustments. Organizations falling below their threshold must calculate a rebate that can be invested in the community or returned to OHA under contract rules.

The process itself faces new accountability requirements under House Bill 4039. The law requires reconciliation of state and CCO data, identification of material contract costs, disclosure of outlier trends and reporting of preliminary rates to the Oregon Health Policy Board. It also requires cost-impact statements before OHA adopts nonprocedural rules.

The budget pressure remains unresolved by transparency alone. OHA told the policy board that 2027 marks the third consecutive year in which capitation increases exceed legislatively approved budget assumptions, requiring additional legislative funding.

For patients, the practical test will be whether the payments sustain provider participation and timely access as eligibility and benefits change. For lawmakers and taxpayers, the next round of financial and enrollment reports will show whether the higher rates match actual costs, whether expected efficiencies materialize and how much further adjustment the system requires.