03:23 PM PST on Thursday, December 29, 2005

By JOSEPH B. FRAZIER, Associated Press Writer

A special legislative session or a slash in services to plug the $170 million hole in the Oregon Department of Human Services budget would be premature and possibly harmful, a spokesman for Gov. Ted Kulongoski said Thursday.

AP File photo

Oregon Gov. Ted Kulongoski.

State forecasters say a combination of factors -- including an underestimation of how many Oregonians would qualify for government-paid health care this biennium -- caused the gap, which came to light this week.

"The governor is reluctant to cut services. This is a very fluid situation," communications director Lon Honklin said.

"These changes in numbers came up very suddenly and they could go in the other direction, or go in a worse direction, in a short period of time."

He said Kulongoski feels a special session is premature.

"Six months from now we could be looking at a whole new set of numbers," Honklin said.

And a year from now, he said, any cuts might be found to be unneeded. "It would be tragic to cut people off from critical services and find we took too much action."

He said Kulongoski's priority now is to "stop the bleeding" and put better forecasting procedures in place.

"It's time to take a breath and look at the whole picture, to get all the stakeholders, the legislators, the executive branch people looking at the same set of numbers," he said.

House Speaker Karen Minnis, R-Wood Village, essentially agreed.

"It's too soon to say until we know the scope of the problem," she said.

"It is important that we make decisions based on good information," she said, adding that's what the Legislature thought it was doing last session.

"We're just five months out of session and there is a significant shortage because of forecasting issues," she said, but added any drastic moves would be premature.

Those in charge of precalculating the Department of Human Services budget say they underestimated those needing services by about 30,000, or 7 percent of the case load. That means that as of now the department will spend some $100 million more for health care than it had planned.

Forecasters hoped economic recovery would do more for the state's poorest residents and had predicted that the number of caseloads would hold steady, when they now are expected to grow by 20,000.

Judy Mohr-Peterson, appointed two months ago to head the estimating team, said figures were off because caseloads grew faster than they had since the Oregon Health Plan was launched in 1993.

Oregon's economic recovery, which is spawning mainly low-wage service-sector jobs without health insurance, has been a major complication, she said.

"Even though we have had a recovering economy, we have also had population growth, and the percentage of our people living under the poverty level has grown," Mohr-Peterson told The Oregonian.

In addition, people who work with low-income Oregonians have done more to let people know they may be eligible, she said.

"Of course the elephant in the living room is federal policy," Honklin said.

"We have a decade's worth of federal and congressional policy that had the effect of reducing the federal share of handling health costs for low-income people while increasing the state share."

Oregon overestimated federal payments by about $50 million, said John Swanson, deputy assistant director for finance and policy analysis with the Department for Human Services.

He said the effect is combined with soaring medical costs.

"Taken together it has created a perfect storm that Oregon is now dealing with," he said.

He predicted other states soon would deal with similar problems.

Oregon has stopped enrolling people in the Oregon Health Plan who don't qualify for traditional Medicaid health coverage. Since the 1990s their number has shrunk from more than 100,000 to about 20,000.

But many people cut off from that plan qualify for regular Medicaid coverage.

Changes in how blind and disabled Oregonians, who have higher medical costs, qualify for Medicaid caused an underestimate of the caseload by about 5,000 and costs for those people of about $37 million more than expected.

State leaders will tackle the problem next month, and some legislative leaders say they favor a special session. They say they want to avoid cutting services to the poor.

The Department of Human Services is the state's largest agency with a two-year budget of $9.8 billion.