Oregon's Basic Health Program: $15M questioned in year one

Oregon's Basic Health Program -- a federal Affordable Care Act option that lets a state cover people earning too much for Medicaid but too little to afford marketplace insurance, in exchange for the state taking on Medicaid-style administration -- launched in July 2024 as OHP Bridge, free coverage for adults with income between 133% and 200% of the federal poverty level.▸ The Oregon Secretary of State's Audits Division⧉ -- Oregon's independently elected watchdog for how the state spends federal money -- reviewed the program's first full fiscal year and issued an adverse opinion, the harshest rating a compliance auditor can give: the state's own eligibility computer system, called ONE, never had the program's 133% income floor written into its testing rules, and a second defect let some people who reported income above the 200% ceiling keep their coverage anyway. Combined, auditors put questioned costs -- payments flagged as improperly made, pending the state's response -- at $15,017,733 in a program that spent $181.7 million its first year.

OHP Bridge⧉ covers medical, dental, and behavioral health care with no premiums, copays, or deductibles, for adults 19 to 65 whose household income falls between 133% and 200% of the federal poverty level and who lack other affordable insurance -- a band set by federal regulation⧉, not state discretion.▸ Below 133%, a person belongs on ordinary Medicaid; above 200%, they're expected to buy a subsidized marketplace plan instead. The whole design depends on the state's eligibility engine enforcing both edges of that window. According to auditors, the Oregon Health Authority⧉ tested the system before launch -- but the lower 133% threshold was inadvertently dropped from the testing protocol, so nothing ever confirmed the floor actually worked.

The gap wasn't caught by the system -- it was caught by the department's own staff, who ran a report during fall 2024 and saw people receiving benefits despite reporting income under 133% of the poverty line.▸ The department filed a fix request with its ONE system vendor in December 2024; the correction didn't land until June 11, 2025, more than six months later.

In that window, auditors identified 3,586 individuals⧉ -- and the benefit months tied to them -- as having received coverage they weren't income-eligible for, putting known questioned costs at $8 million.▸ The state has since fixed the code, ended coverage for the affected group, and says it finished the last of the case-by-case cleanup by December 2025.

The other side of the eligibility window failed differently.▸ Auditors pulled a random sample of 60 Basic Health Program cases and found five with exceptions -- three where a request for income verification came back showing the person was now over the 200% ceiling, but the ONE system never closed their case; one where a caseworker may have cleared that same kind of request in error; and two from data-entry mistakes (alimony income miscoded, an employer-insurance premium never logged). The five known exceptions cost the program $17,733.

The RFI-closure failure -- the system not shutting off benefits after its own verification process flagged someone as over-income -- showed up in 3.8% of the 60-case sample.▸ Auditors extrapolated that rate across the full caseload to project $7 million in likely questioned costs, by far the largest single number in the audit. In its formal response, the state pushed back directly: "the state does not agree with the SOS's questioned costs because those costs do not line up with the estimated number of members impacted or the length of time that payments may need to be reallocated to the trust fund." That dispute is over the extrapolation's scale, not the underlying defect -- the department doesn't contest that the RFI-closure failure happened, only how big a bill 60 sampled cases can support.

Oregon administered $21.1 billion in federal financial assistance in the year the audit covers, spread across 433 programs; auditors deep-tested the 16 largest.▸ Fifteen of them, including Medicaid itself, came back with unmodified -- clean -- opinions. Highway Planning and Construction drew a disclaimer, because the state transportation department couldn't isolate its 2025 federal spending for auditors to check at all. The Basic Health Program was the only one to draw an adverse opinion, auditing's most severe compliance rating, meaning the state did not comply, in all material respects, with federal eligibility rules for a program built around one narrow, three-year-old income test. Auditors classified both findings as material weaknesses -- their term for a control gap serious enough that material noncompliance could go undetected in normal operations, not just an isolated slip.

Federal rule sets the deadline: under 42 CFR 600.715⧉, Oregon must repay the Basic Health Program's federal trust fund -- money the state drew down on the assumption every enrollee actually qualified -- by February 28, 2027.▸ The department says it's on track. What isn't settled is the size of the check for the second finding: the state has committed to refunding the $8 million tied to the below-133% coding defect and the $17,733 in confirmed sample exceptions, but it has not conceded the $7 million sample-based projection, arguing the 60-case extrapolation overstates both how many members were affected and how long the exposure ran. Until that dispute resolves, the final restitution figure -- and whether Oregon's second full year of Basic Health Program administration clears its next audit -- remains open.