Governor Deval Patrick's Budget Recommendation - House 2 Fiscal Year 2011

Governor's Budget Recommendation FY 2011

Health Care Reform

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Governor Patrick    FY2011 House 2 Budget Recommendation:
    Issues in Brief

    Deval L. Patrick, Governor
    Timothy P. Murray, Lt. Governor


Governor Patrick and Lieutenant Governor Murray’s fiscal year 2011 budget maintains our commitment to the Commonwealth’s historic health care reform initiative.  The Administration has implemented an innovative, thoughtful legislative vision which has transformed the way that the Commonwealth’s residents access health care and has made Massachusetts a national model for how to expand coverage to virtually all of our residents.  Since Governor Patrick took office in 2007, he has committed himself and his Administration to making health care reform a success.

Thanks to the Administration’s efforts – and the continuing commitment of the Legislature and a diverse coalition of stakeholders – over 97 percent of our state’s residents now have health insurance, the highest rates of insurance in the nation.  Coverage levels have held steady even in the midst of a dramatic national economic downturn, a testament to the wisdom of the statutory framework for reform and the Administration’s sure and steady approach to implementation.

Percentage of Massachusetts Residents Without Health Insurance

This graph shows percentage of Massachusetts residence without healht insurance from 2000 to 2009.  The percentage of Massachusetts residents without health insurance in 2000 was 5.9% and it decreased in FY09 to 2.7%.

Source:  Massachusetts Division of Health Care Finance and Policy.  Key Indicators Report. November, 2009.

Health care reform has benefited our residents and our economy. Because of the steps we all have taken to make health insurance more affordable and accessible, there are countless people throughout the Commonwealth who have access to their own doctor – or life-changing medications or procedures – for the first time.  Likewise, investing in health care strengthens our world-renowned medical sector – a source of daily medical miracles; an engine for job creation; and a magnet for research dollars and human talent. 

The Administration has vigilantly managed the finances of health care reform, delivering expansions in coverage without breaking the back of the state budget (see chart below).  Since its inception, the incremental net cost of health care reform to the state (net of federal reimbursement) is a little more than 1 percent of its entire annual budget.  The model is working as intended – with the costs of expanding state coverage partly offset by lower expenses for uncompensated care; a continuing strong financial partnership with the federal government; and an enduring commitment by the vast majority of our employers to offer coverage to their employees instead of relying on the state to do so.

Health Care Reform Financing
    Pre-Health Care Reform Health Care Reform  
    FY06 Actuals FY07 Actuals FY08 Actuals
MassHealth Spending   $- $511 $642
Commonwealth Care   $- $133 $628
Aliens With Special Status   $- $- $-
Uncompensated Care Pool/Health Safety Net Trust Fund   $656 $665 $416
Total Spending   $656 $1,309 $1,686
Health Safety Net Provider Assessment and Insurer Surcharge   $320 $320 $320
Federal Financial Participation (FFP)   $303 $816 $888
Total Revenue   $623 $1,136 $1,208
Total State Share   $33 $173 $478


Notes on MassHealth:

MassHealth spending includes eligibility and service changes, fee-for-service rate increases, MCO rates under Section 122, and Section 122 supplemental payments, on a date-of-service basis. No enrollment increases besides those that were directly attributable to eligibility changes have been included in this analysis. Does not include supplemental payments to managed care organizations, the non-federal share of which was funded through local revenues (versus state funds) and which accordingly did not result in state costs. Spending for fiscal year 2010 is projected.

Notes on Uncompensated Care Pool/Health Safety Net Trust Fund:

Spending includes offsets from the Medical Assistance Trust Fund. Uncompensated Care Pool/Health Safety Net spending based on UCP/HSN 10/1-9/30 fiscal year. Health Safety Net payments for fiscal year 2009 is based on latest projection. Health Safety Net payments for fiscal year 2010 and fiscal year 2011 are based on available sources. 

Notes on Commonwealth Care:

Commonwealth Care spending is net of enrollee contributions.

Notes on Revenue:

FFP includes FMAP on listed spending and Designated State Health Programs (DSHP), and increased FMAP under the federal stimulus bill. The enhanced FMAP for fiscal year 2011 assumes an unemployment tier 3 for the first six months and tier 2 for the second six months.  Does not include new revenues dedicated to health care reform (e.g., Fair Share assessment, $1 per pack increase in cigarette taxes).


The Massachusetts Medicaid program provides comprehensive health insurance to approximately 1.2 million low-income Massachusetts children, adults, seniors and people with disabilities. Health care reform expanded MassHealth eligibility to children with incomes up to 300 percent of the federal poverty level and broadened eligibility for the Insurance Partnership Program to individuals up to 300 percent of the federal poverty level.  It also restored certain benefits that had previously been eliminated.

The Administration’s fiscal year 2011 budget includes $9.84 billion for the MassHealth program.  This is 6.5 percent higher than fiscal year 2010 estimated spending of $9.237 billion. The fiscal year 2011 budget fully maintains eligibility for Massachusetts residents and funds projected enrollment growth of 3 percent.

Health Care Reform Financing
  FY07 FY08 FY09 FY10 FY11 Percent Increase
HMO 349,042 372,403 400,030 433,152.00 461,868 6.6%
PCC 293,645 302,819 313,047 357,943.00 362,218 1.2%
TPL 185,213 189,229 188,895 152,436.00 155,929 2.3%
Seniors 106,664 108,629 109,761 112,400.00 113,837 1.3%
FFS 161,091 166,204 166,188 164,212.00 162,896 -0.8%
Total 1,095,655 1,139,284 1,177,921 1,220,143.00 1,256,747.29 3.0%
% Change 5.1% 4.0% 3.4% 3.6% 3.0%  


Programs with significant spending and utilization increases include the Children’s Behavioral Health Initiative (CBHI), Adult Day Health, Personal Care Attendants, Day Habilitation and Home Health. The budget also keeps MassHealth affordable for its members.  Due to smart fiscal management and leveraging the most value for our spending, the only additional cost-sharing for members is a $1 increase in co-payments for generic drugs, and this modest increase will not be applied to antihyperglycemics, antihypertensives and antihyperlipidemics (which are used to manage and treat long-term, chronic medical conditions).

The budget keeps MassHealth costs affordable for the state and members by maintaining appropriate discipline on rates, introducing new program integrity measures and restructuring adult dental services. The MassHealth adult dental benefit is restructured to cover preventative and emergency services only, excluding restorative dental services.  This change will not impact children or intellectually disabled members with active cases through the Department of Developmental Services, and all other members impacted by this restructuring will have access to restorative dental services at Community Health Centers through the Health Safety Net.  Revenue initiatives at MassHealth include restructuring payments for prescription drug coverage in managed care plans to achieve higher drug rebate revenues, and expanding the Health Safety Net payer surcharge to Managed Care Organizations serving MassHealth and Commonwealth Care members to provide additional funding for MassHealth and Commonwealth Care.

Commonwealth Care

The Commonwealth Care program was created with the enactment of health care reform. The program provides health insurance coverage for individuals under 300 percent of the federal poverty level that do not have access to employer-sponsored insurance. Commonwealth Care fully subsidizes individuals under 100 percent of federal poverty level and institutes a sliding scale of member premiums for those above that income threshold.  It provides health care services through a fully capitated insurance model. As of January of 2010, there are approximately 150,110 members enrolled in Commonwealth Care, excluding the Aliens with Special Status Population (see next section on Commonwealth Care Bridge).

This graph shows enrollment in the Commonwealth Care program from December 2007 through January 2010. In September 2009 it appears as though enrollment went down but that is strictly due to the fact that the Aliens with Special Status population was terminated from CommCare.

The budget fully preserves current eligibility for Commonwealth Care and invests $838 million to fund additional enrollment in the program in fiscal year 2011 (to fund over 20,000 additional members in the program from current enrollment levels).  The budget does not include any increases in Commonwealth Care enrollee premiums.  Plan Type 1 co-payments would increase by only $1 for generic drugs, consistent with MassHealth changes, with no co-payment increases for Plans Type 2 and 3.  Existing dental coverage for Plan Type 1 members would be restructured in the same manner as MassHealth dental benefits.

This bar graph displays the budget and actual spending amounts for the Commonwealth Care and Commonwealth Care Bridge programs from FY09 through FY11. In FY09, $869 million was budgeted for the CommCare program but only $805 million was spent (this includes the aliens with special status population).  In FY10, the budgeted amount for the Commonwealth Care program is $723 million and the estimated spending is $730 million.  The Commonwealth Care Bridge program will spend $40 million in FY10.  In FY11, the budget amount for CommCare is $838 million and the budget amount for CommCare Bridge is $75 million.

Combined funding of $913 million for Commonwealth Care ($838 million) and the Commonwealth Care Bridge program for Aliens with Special Status ($75M) is 5 percent more than what was budgeted for Commonwealth Care in the General Appropriations Act for fiscal year 2009. Comparing fiscal year 2009 spending and the fiscal year 2011 budget proposal, Commonwealth Care spending (including coverage for Aliens with Special Status) has grown by 6.7 percent on average per year.

Commonwealth Care Bridge

Aliens with Special Status (legal immigrants who have resided in the U.S. for less than five years) lost eligibility for Commonwealth Care in fiscal year 2010, due to the extreme fiscal challenges accompanying the national economic downturn and the fact that the federal government does not reimburse states for health insurance coverage for this population.  A separate investment of $40 million was appropriated to provide health insurance for this population.  This coverage is now available through the newly created Commonwealth Care Bridge program.

Commonwealth Care Bridge currently provides coverage to approximately 26,000 Aliens with Special Status, who were enrolled over a three-month period from October to December of 2010.  Enrollees have been eligible to receive care through a network of providers that fully meets the Connector’s Commonwealth Care network adequacy standards.  While cost-sharing is in some instances higher than that for Commonwealth Care and some benefits are excluded, steps have been taken to reduce any hardships for members.

The Administration’s fiscal year 2011 budget includes $75 million for the Commonwealth Care Bridge program.  This program will continue to be run by the Secretary of Administration and Finance, the Secretary of Health and Human Services and the Executive Director of the Connector.

This is major growth in funding for coverage for Aliens with Special Status, particularly in a very challenging fiscal environment.  This reflects the Administration’s continuing, deep commitment to providing health insurance to these hardworking legal residents of the Commonwealth.  The Administration’s ultimate goal remains fully integrating Aliens with Special Status into Commonwealth Care.  While that is not possible in the current fiscal environment (particularly given current federal reimbursement policy), our proposed approach for fiscal year 2011 builds on last year’s accomplishments and thus makes progress towards fully reintegrating this population into Commonwealth Care.  With that $75 million investment – and with our intention to be aggressive in maximizing its value – our vision and goal is to expand the capacity of Commonwealth Care Bridge. 

Health Safety Net

Overseen by the state’s Division of Health Care Finance and Policy, the Health Safety Net (HSN) reimburses hospitals and community health centers for health care services provided to low-income uninsured or underinsured residents.  It was formerly known as the Uncompensated Care Pool.  The Health Safety Net is financed by dedicated revenues from a hospital assessment ($160 million) and insurer surcharge ($160 million), other offsetting payments ($70 million) and any state contribution from the General Fund.

Success in expanding enrollment in health insurance through health care reform has resulted in decreased Health Safety Net utilization and payments.  As compared to Uncompensated Care Pool fiscal year 2007, Health Safety Net payments sustained a record drop through Health Safety Net fiscal year 2009 (from $661 million to $414 million).

This chart shows hospital and community health center payment from FY06 through FY09.  Health Safety Net fiscal year 09 payments are over $225 million less than FY06 payments.

Source:  Division of Health Care Finance and Policy, Health Safety Net 2009 Annual Report, December 2009

Health Safety Net Fiscal Year 2010

To help reduce the burden on hospitals in Health Safety Net fiscal year 2010 (Oct. 2009-Sept. 2010) for providing care to the uninsured and underinsured, the Administration intends to dedicate accumulated Health Safety Net fiscal year 2008 and 2009 surpluses (approximately $30 million) to offset 2010 costs. 

Health Safety Net Fiscal Year 2011

Despite continued fiscal challenges, the Administration is making a $30 million General Fund contribution to the Health Safety Net in its fiscal year 2011 budget proposal – maintaining fiscal year 2010 revenues for the Health Safety Net.  We will continue to closely monitor the Health Safety Net to refine projections for fiscal year 2010 and 2011 demand based on updated information.

Cost Containment for our Families and Businesses

The fiscal year 2011 budget is an important statement of the Administration’s continuing commitment to health care reform.  But the Administration’s efforts to improve the quality and affordability of health care extend well beyond the state budget.  The Administration inherited a longstanding, national and state problem of rapidly growing health care costs for families, businesses (particularly small businesses) and government – escalating at rates that outstrip their capacity to keep up.  This problem was not created by health care reform, but it does threaten the long-term sustainability of reform and, more fundamentally, force harmful choices between paying for health care and meeting other family needs, creating jobs or investing in other important public priorities. 

Governor Patrick has rolled up his sleeves and begun the hard work of health care cost containment.  Key Administration cost containment initiatives include:

  • Payment Reform:  The Administration has broken new ground on payment reform, leading a State Special Commission on the Health Care Payment System to unanimously endorse a groundbreaking blueprint to reward value instead of volume when it comes to paying for health care.
  • All-Payer Claims Database:  The Administration’s Division of Health Care Finance and Policy is moving forward on implementing an all-payer claims database to promote a broad array of cost containment and quality improvement initiatives involving providers, payers, employers and consumers.
  • Health Information Technology:  Led by the Administration, the Massachusetts Health Information Technology Council is actively coordinating federal recovery act (ARRA) and state funding to support the meaningful use of interoperable electronic health records and develop the capacity for widespread health information exchange.  More widespread adoption and use of health information technology has the potential to improve quality of care and reduce costs.
  • Health Care Quality and Cost Council:  Under the leadership of the Administration, the Health Care Quality and Cost Council has launched a website (MyHealthCare Options) that provides consumers with cost and quality ratings for hospitals across the state, so they can make informed choices about their health care.  The Council has also issued a comprehensive roadmap to cost containment that reinforces the drive towards payment reform and highlights additional, system-wide opportunities for improving quality and containing costs.
  • Determination of Need: In 2008, the Public Health Council issued regulations that strengthened the Determination of Need Program by guaranteeing proper review of any proposed major outpatient capital project or costly equipment purchase – an effort to reduce health system costs by improving health system planning.  It also required public reporting of medical mistakes and hospital infections and prohibited billing by any provider for care associated with a significant medical mistake.
  • Premium and Cost Hearings:  The Administration’s Division of Insurance is currently conducting intensive public hearings on health insurance premium increases facing small businesses, focused specifically on work insurers are currently doing to reduce costs and future steps that may be necessary to eliminate the substantial increases impacting the small-group market.  The Division of Health Care Finance and Policy will soon follow up with a series of reports and hearings that broadly examine health care provider and payer cost trends and recommend strategies to address cost drivers.

Just as has been the case with health care reform, the cost containment initiatives launched by Governor Patrick have Massachusetts once again leading the nation and charting the path to higher-quality, more affordable health care for all.

Prepared by Glen Shor, Candace Reddy, and Kelly Driscoll, Executive Office for Administration and Finance ·
For more information contact: (617) 727-2040

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