Op-ed: Health fee pinches taxpayers

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Read this op-ed in the Boston Herald (September 4, 2016).

Sometimes the Affordable Care Act (ACA) seems like part of history. While headlines about implementation pains persist, many changes are taking place under the radar. One such change that has received almost no attention is a new fee on Medicaid, called MassHealth in Massachusetts.

The ACA contained roughly 20 revenue-raising provisions to help fund coverage expansions. One of these new fees (the Health Insurance Provider Fee, or HIPF) is assessed, in part, on companies providing coverage for those on MassHealth, but now taxpayers are funding the entire cost of the fee.

It may sound odd, but the fee amounts to the federal government taxing state governments and itself. Paying it increases MassHealth spending, which taxpayers support through both state and federal taxes.

How did this happen?

When the ACA first took effect, it was unclear who would cover the fee. Usually, when a tax is levied on a company, the cost is directly or indirectly passed on to consumers through higher prices or additional charges. This quickly became true for the HIPF.

After some contention, the federal government put the burden on taxpayers. The Centers for Medicare and Medicaid Services (CMS) confirmed in a 2014 document that CMS “believes the health insurance provider fee is a reasonable business cost to health plans that is appropriate for consideration as part of the non-benefit component of the rate, just as are other taxes and fees.”

This means the HIPF is included in Medicaid payments made by states and the federal government.

In 2015 alone, the Massachusetts HIPF cost $36 million, $18 million of which was state money that could otherwise have been used for education, public safety or infrastructure. Over the next decade the commonwealth will send more than $160 million to Washington to pay this fee, and taxpayers will shell out over $320 million for the total cost of the HIPF.

The HIPF is so contentious that Congress put a moratorium on the fee’s collection in 2017. But it will kick back in 2018, and will increase in the future.

As contentious as the debate about the ACA has been nationally, all can agree on the importance of fully understanding the law’s impact on Massachusetts. Ignorance can be expensive, as the fiasco of developing a new state health care exchange taught us.

Despite its intention, the HIPF is collecting money directly from taxpayers, not large insurers that profit from the ACA’s Medicaid expansion. The fact that it will cost MassHealth over $160 million and taxpayers over $320 million by 2025 is something Massachusetts policymakers need to be aware of as they contemplate the law’s ongoing impact.

Josh Archambault is a senior fellow and Lauren Corvese a research assistant and development coordinator at Pioneer Institute, a non-partisan think tank.