FY 2015 Budget Recommendation:
Key Initiatives
Deval L. Patrick, Governor
Expanding access to health care and making health care more affordable for individuals, families and businesses is one of Governor Patrick’s top priorities. The Patrick Administration’s successful implementation of the 2006 health care reform law (Chapter 58) served as the model for the Affordable Care Act (ACA), which is expanding health insurance access for the benefit of citizens across the country. And with the passage of health care cost containment legislation in 2010 and 2012, the Commonwealth is leading the way in making health care coverage more affordable.
As a result of the Administration’s successful implementation of health care reform, 97% of Massachusetts residents have health insurance – the highest coverage rate in the country. Health care reform and its focus on care coordination, prevention and wellness has enhanced the quality of care for Massachusetts residents. The Administration’s implementation of the ACA maintains and builds on these successes. More residents now have access to MassHealth and state and federal subsidies through the Health Connector, the Commonwealth’s health insurance Marketplace. The Administration has successfully leveraged enhanced federal revenue to facilitate the ACA expansion and to make additional investments in health care.
The Patrick Administration’s groundbreaking efforts to improve health care quality and contain health care costs have bent the health care cost curve, slowing down health care spending growth. In 2008, Chapter 305: An Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Care addressed transparency in health care costs and premium rates, statewide electronic health records, payment and delivery reform, workforce development for primary care practitioners and pharmaceutical industry reform. In 2010, Chapter 288: An Act to Promote Cost Containment, Transparency and Efficiency in the Provision of Quality Health Insurance for Individuals and Small Businesses addressed the problem of rising health insurance premiums by requiring insurers to meet certain administrative, surplus and medical loss ratio criteria. The Administration’s efforts to control large annual premium increases through insurer rate review slowed the average annual increase in health insurance premiums from over 16% in 2010 to 1.9% in January 2014 and saved businesses and families hundreds of millions of dollars. Competitive procurements and targeted incentives at the Health Connector and the Group Insurance Commission (GIC) have also saved millions in valuable taxpayer dollars.
In 2012, Governor Patrick signed another landmark cost containment and quality improvement law, Chapter 224: An Act Improving the Quality of Health Care and Reducing Costs through Increased Transparency, Efficiency and Innovation. Chapter 224 includes a variety of tools to help further contain costs while maintaining high quality, best-in-class care, including the monitoring and enforcement of health care cost growth, adoption of alternative payment methodologies, payment transparency, investments in wellness and prevention, an expanded primary care workforce, health resource planning and support for health information and technology. Cumulatively over the next 15 years, Chapter 224 is estimated to result in $200 B in savings across the Commonwealth.
The Patrick Administration has been coordinating a statewide effort to implement the ACA since its enactment, which includes streamlining the Commonwealth’s subsidized health insurance programs. Legislative changes refined MassHealth and Health Connector eligibility statutes, realigned state-subsidized health insurance programs, aligned small and non-group insurance laws with ACA rules and allowed for data sharing to facilitate implementation of the new integrated eligibility system. Legislation also designated the Health Connector as the state’s certified Marketplace and authorized the Health Connector’s ConnectorCare program, which supplements federal premium and cost-sharing subsidies to keep coverage affordable for low-income individuals.
The timing of ACA implementation requires the Governor’s FY 2015 budget to be based on assumptions around enrollment of newly eligible members. Over the coming months, the Patrick Administration will collect enrollment data for all insurance plans (public and private) in order to monitor the impacts of ACA implementation.
MassHealth, the Commonwealth’s Medicaid program, provides health care to 1.6 million low-income children and families, low-income adults, disabled individuals and low-income elders across the Commonwealth. The FY 2014 budget supported the first six months of ACA implementation at MassHealth. The Governor’s FY 2015 budget supports the annualized costs of the ACA expansion population and ongoing enrollment.
As of January 1, 2014, all adults aged 19-64 who are citizens or qualified noncitizens with incomes at or below 133% of the federal poverty level (FPL) are eligible for MassHealth. Approximately 135,000 eligible individuals were previously enrolled in MassHealth Basic, MassHealth Essential or MassHealth Insurance Partnership. These programs were authorized for federal support through the Commonwealth’s Section 1115 Demonstration Waiver, which gives states additional flexibility to design their Medicaid programs. A projected 190,000 members are already, or will become, eligible for MassHealth in FY 2014, with the majority transitioning from other subsidized programs including Commonwealth Care, the Medical Security Program (MSP) and the Health Safety Net (HSN). Another 20,000 individuals not currently in subsidized programs are projected to become eligible in FY 2015.
The Governor’s FY 2015 budget includes $1.7 B for the projected 345,000 members in the ACA expansion population. The majority of this spending (~80%) is offset by federal revenue at the Federal Medical Assistance Percentage (FMAP). Under the ACA, the FMAP for much of the expansion population begins at 75% in 2014 and ramps up to 90% by 2020. Members who were not previously eligible for subsidized coverage yield an FMAP of 100% in 2014, falling to 90% by 2020. This is higher than the Commonwealth’s traditional 50% FMAP for most spending on subsidized coverage.
For the members that are new to state-subsidized insurance (including members transitioning from the HSN), the FY 2015 budget assumes a net cost of $58 M. The net gain to the Commonwealth for members previously in subsidized coverage is $350 M in additional federal revenue. The Governor’s FY 2015 budget creates the Health Insurance Expansion Fund to ensure this additional federal revenue supports the expansion of health insurance to low-income residents of the Commonwealth.
The budget also supports the annualized costs of several policy changes that became effective on January 1, 2014 that ensure streamlined and comprehensive health coverage. These policy changes include providing standard benefits for all pregnant women earning at or below 200% FPL and young adults aged 19-20 earning at or below 150% FPL; extending coverage to certain lawfully present immigrants not eligible for Marketplace coverage due to new federal rules; maintaining coverage until the end of the month for members transitioning to subsidized Qualified Health Plans (QHPs) in the Marketplace; providing subsidies to low-income employees of small businesses who are not eligible for federal subsidies through the Marketplace; using Modified Adjusted Gross Income (MAGI) as the income determination methodology and applying a similar income counting methodology to disabled members; and instituting a 90-day provisional eligibility period for individuals to verify their eligibility if MassHealth is unable to do so through electronic data matches.
The Health Connector, the Commonwealth’s health insurance Marketplace, offers affordable, high quality health insurance to the individual and small group market. Prior to the ACA, the Health Connector administered the Commonwealth Care health plan for low-income individuals who were ineligible for MassHealth. The Patrick Administration is phasing out Commonwealth Care in FY 2014 in a manner which ensures continuous coverage for those transitioning into the ConnectorCare program.
Under the ACA, many individuals and families who shop for a health plan through the Marketplace are eligible for federal tax credits and state subsidies. Those with household incomes below 400% FPL may be eligible for federal Advanced Premium Tax Credits, while those below 300% FPL may additionally be eligible for state ConnectorCare subsidies to reduce consumer premiums and out-of-pocket expenses to levels consistent with the Commonwealth Care program. A monthly average of approximately 145,000 individuals with incomes up to 300% FPL are expected to be enrolled in the ConnectorCare program. Because FY 2015 is the first full fiscal year of subsidy implementation, the Patrick Administration has increased funding for the ConnectorCare program to $235 M. Further, the employer assessment that was previously used to help finance health insurance for the unemployed through MSP will now help to defray the cost of the ConnectorCare program.
The Commonwealth is leading the way once again in advancing collaborative solutions to reduce health care cost growth, improve the quality of care and enhance the transparency of our health care system for the benefit of individuals and businesses.
The agencies within the Executive Office of Health and Human Services (EOHHS) participate in a variety of initiatives to improve quality and contain costs. The Department of Public Health (DPH) is partnering with communities to make a historic investment in prevention, public health and wellness efforts. DPH is also partnering with small businesses to encourage the adoption of workplace wellness programs through a new wellness tax credit program. Agencies are partnering with hospitals and community health centers to support infrastructure investments, working with organizations to invest in health care workforce training and convening a public process to develop recommendations on the integration of behavioral health care. In order to enhance transparency, Chapter 224 requires health care providers to provide consumers with the contracted costs of proposed medical treatments.
The adoption of new health care payment methods at MassHealth aims to reward quality care, improve health outcomes and more effectively spend health care dollars. MassHealth’s OneCare program integrates and coordinates Medicare and Medicaid for individuals who are eligible for both programs. EOHHS secured a $44 M State Innovation Model grant from the federal Centers for Medicare & Medicaid Services (CMS) to help transform our health care system by restructuring how care is delivered and how providers are reimbursed. The FY 2015 budget supports continued implementation of MassHealth’s Primary Care Payment Reform (PCPR) Initiative, which promotes primary care and behavioral health integration and provider accountability.
Source: Commonwealth of Massachusetts
In January 2014, Governor Patrick launched the next phase of the Mass HIway Health Information Exchange (HIE), an innovative new tool to allow providers to locate, request and securely retrieve electronic medical records from other participating providers. As a result of the Governor’s leadership, Massachusetts was the first state in the nation to receive federal funding through CMS to develop the HIway. MassHealth has also launched a real-time, innovative predictive modeling system to detect and prevent Medicaid fraud, waste and abuse by identifying high risk claims and suspicious providers prior to releasing payment.
Chapter 224 established the Health Policy Commission (HPC), whose responsibilities include monitoring health system costs against the Commonwealth’s new sustainable cost growth benchmark, developing policies to reduce overall cost growth while improving the quality of care and reviewing market changes with the potential to increase health care spending. The HPC launched its first competitive grant program, known as Community Hospital Acceleration, Revitalization, Transformation (CHART), which will make nearly $120 M available over four years so that eligible community hospitals can promote delivery system transformation, innovative payment models, care coordination and information technology improvements.
The HPC is working to bring more oversight, transparency and accountability to the health care market. Provider organizations are now required to file notices of material change in their operations or governance structure, such as mergers, acquisitions or affiliations, allowing the HPC to track the frequency, type and nature of market changes and publish comprehensive reviews of changes that are anticipated to have a significant impact on health care cost growth or market competition. The HPC has initiated three reviews and has the authority to refer its findings to law enforcement agencies for potential action. The HPC also conducts annual cost trends hearings and publishes annual reports focusing on the health care industry’s cost containment and quality improvement efforts. The report discusses cost trends and growth drivers, including factors that contribute to the Commonwealth’s growth being above or below the benchmark set by Chapter 224 (3.6% for 2013 and 2014), and a profile of the health care delivery system. In 2014, the HPC will build on transparency enhancement efforts by creating a provider registration program and focusing on quality and efficiency improvement through the creation of accountable care organizations and patient-centered medical home certification programs.
The Center for Health Information and Analysis (CHIA) assembles and provides information and analysis in the health care system to support the implementation of health reform in the Commonwealth. In August 2013, it published the Annual Report on the Massachusetts Health Care Market, which for the first time consolidated analysis and monitoring of premiums, medical expenditures and provider consolidation. In December 2013, CHIA published its annual baseline report on alternative payment methodologies. CHIA also invested in the All Payer Claims Database (APCD). Its collaboration with the Health Connector has allowed Massachusetts to become the only state in the nation to build and deploy a state-specific risk adjustment program to implement the ACA. In addition, CHIA is working with seven state agencies on administrative simplification projects to enhance their ability to use CHIA data in achieving their goals.
Continued investments in 2014 will make CHIA data more useful to multiple audiences: other state agencies, health care market participants and researchers. By the end of 2014, CHIA will have a new health information website, will have published quality information on providers statewide and will be serving the health data needs of multiple state agency partners on an operational basis. In August 2014, CHIA will publish its second Annual Report, including the first measurement of Total Health Care Expenditures (2012-2013), which will be evaluated against the Chapter 224 cost growth benchmark.
Working closely with the federal government, other state agencies and insurance carriers, the Division of Insurance (DOI) ensured that all ACA-compliant plans and premiums were approved by August 2013. Through its rate review process, DOI has significantly reduced the average annual increase in health insurance premiums from over 16% in 2010 to 1.9% in January 2014, saving small businesses and families hundreds of millions in premium costs and rebates. In order to empower consumers with provider price information, DOI provided guidance to carriers in their efforts to make providers' contracted costs and consumers' projected out-of-pocket costs available on carrier websites or through toll-free telephone systems. In 2013, DOI also developed regulations and processes to enforce mental health parity laws.
The GIC provides health insurance benefits to more than 400,000 people, including active and retired state employees and dependents, participating municipalities and certain retired municipal teachers. The GIC continues to work closely with its health plans to control costs and initiated a health plan procurement that is estimated to save the Commonwealth $1.29 B through FY 2018. Savings will be achieved by reducing the average annual growth in spending from 6% to 2% in FY 2015, saving over $75 M and holding growth at or below 2% thereafter. Through the procurement, the GIC required plans to establish and share risk with a network of risk-bearing provider organizations (IRBOs) sufficient to cover 75% of GIC covered lives by FY 2016. The use of IRBOs promotes more efficient, high value health care delivery as envisioned by Chapter 224.
Through the success of municipal health care reform, the GIC has opened its doors to the cities and towns of the Commonwealth to participate in the Commission’s health insurance program. Since the Administration proposed municipal health reform in January 2011, more than 260 municipalities and regional school districts came to agreements with employees, achieving premium savings totaling more than $237 M. Since then, 23 more cities, towns and school districts joined the GIC: 12 used the new reform’s expedited decision-making process, and 11 joined as a result of negotiations inspired by the reform process. The GIC now has 49 cities, towns and school district members, with more than 45,000 municipal subscribers.
The Governor’s FY 2015 budget for programmatic spending (excluding administration) at MassHealth is $13.5 B ($6.3 B net of federal reimbursement), which is an 11.2% increase over FY 2014 estimated spending. MassHealth’s FY 2015 spending is only 4.0% higher than FY 2014 spending when excluding investments for provider and hospital rate increases and partial-year restoration of coverage for dentures in FY 2015, enrollment increases for the non-expansion population, the full-year costs of FY 2014 investments in hospital rates and annualized ACA costs. A significant portion of the increase represents the annualized cost of new members under the ACA that were budgeted for only six months in FY 2014 and the continued influx of newly eligible members of the expansion population during FY 2015. The budget supports new investments in provider rates, such as 2% capitation rate increases for Managed Care Organizations (MCO), including those in the MassHealth CarePlus program, and 2% capitation rate increases for the Massachusetts Behavioral Health Partnership (MBHP). The budget also includes funding for 2% increases in base hospital rates and increases to fee-for-service provider rates, and restoration of coverage for dentures in the second half of the fiscal year.
Most of the investments from the FY 2014 budget are maintained in the Governor’s FY 2015 budget, including $67 M for increases to base hospital rates and alternative payment methodology (APM) participation; $33.6 M to restore coverage for fillings for adult members; $11.8 M for Children’s Hospital for high-complexity pediatric care; $3 M for Tufts Medical Center for high-complexity pediatric care; $3.3 M for pediatric rehabilitation hospital rates (Franciscan Hospital for Children); $4.3 M to pay Critical Access Hospitals 101% of Medicare costs; and $5.5 M for a 1% inpatient and outpatient rate add-on for disproportionate share hospitals (the FY 2014 budget included a 5% rate add-on). The fall 2014 Infrastructure and Capacity Building grant awards are funded in the FY 2014 budget; and therefore no additional funding is included in FY 2015. In addition to MassHealth’s programmatic appropriations, the budget includes $34.3 M to provide necessary resources for community support services and coordination to persons with Acquired Brain Injuries (ABI) who may have previously been residing in long-term care facilities.
The Governor’s FY 2015 budget includes a General Fund transfer to the Medical Assistance Trust Fund (MATF) at $412 M, which will support supplemental payments to safety net hospitals and providers with high Medicaid volume. The Governor’s FY 2015 budget includes a General Fund transfer to MassHealth’s Delivery Systems Transformation Initiative (DSTI) trust fund at $210 M and supports $235.5 M in payments to participating hospitals. FY 2015 DSTI payments are increased 25% to support additional hospital initiatives, consistent with MassHealth’s 1115 Demonstration Waiver renewal application.
The Governor’s FY 2015 budget maintains $30 M in support for health coverage through HSN for the Commonwealth’s most vulnerable populations, provided through a transfer from the Commonwealth Care Trust Fund. The transition of members from the HSN to MassHealth and the Health Connector will significantly reduce the amount of uncompensated care incurred by hospitals and community health centers through a reduction in the HSN shortfall. Current estimates suggest ACA implementation will reduce HSN demand by approximately $196 M in FY 2015, resulting in only $34 M in uncompensated care.
The Governor’s FY 2015 budget proposes to eliminate the sales tax exemption for candy and soda, which will generate $57 M in FY 2015 that will be deposited into the Commonwealth Health and Prevention Fund to support key programs within DPH, including:
For more information on the Governor’s priority of Expanding Access to Affordable, Quality Health Care in program format, please visit www.mass.gov/budget/governor, the online version of the FY 2015 Governor’s Budget. Click on the Administration Priorities tab in the FY 2015 Program Budget Recommendations Quick Link. The tab will open to show a list of the Governor’s priorities and the core set of programs that are critical in supporting the goals of each initiative.
Prepared by the Executive Office for Administration and Finance ·
www.mass.gov/budget/governor
For more information email: contactanf@massmail.state.ma.us (617) 727-2040