Feds plug the Money Hole in Massachusetts Health Reform?

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To close the loop from an earlier post on federal money being sent to safety-net hospitals in Massachusetts to balance their budget sheets, the State House News Service had this piece recently.

Massachusetts is due to receive $157 million in federal funds that will help trigger the release of $230 million in payments to hospitals that serve disproportionate shares of low-income and uninsured patients.  The funds are expected to provide state matches and free up the flow of funding to Boston Medical Center and hospitals in Brockton, Dorchester, Lawrence, Holyoke and Springfield.  Cambridge Health Alliance has already received about half of the $486 million in funds approved last October by federal government health care administrators.   The payments stem from the state’s application last March for amendments to its Medicaid waiver with the federal government. The waiver agreement announced Thursday gives the state the authority to make $230 million in payments to Boston Medical Center, Brockton Hospital, Caritas Carney Hospital, Holyoke Medical Center, Lawrence General Hospital, and Mercy Medical Center.  The hospital payments will be made in two installments and will help each hospital implement measures necessary to accommodate next steps in payment reform. The funding will be distributed based on each institution’s percentage of state-supported care, relative to their percentage of privately insured patients.  Patrick administration officials said the payments to hospitals will also help them transition to new payment methodologies that will focus on outcomes and quality rather than the quantity of services delivered.

The fiscal situation that faces many of these hospitals should highlight many questions for policymakers about the long term sustainability of reform. The rationale for the money looks like a re-wrapped fruitcake last given when a political deal was struck to get the original health care reform bill passed. Now it is to ease the “transition to new payment methodologies” before it was to ease the transition from pre-reform to post-reform, what will the reason be next year?  But many questions go unanswered….

Why is the pool of money set aside to cover the cost of care for the uninsured still at $400 million dollars (when it was going to be phased out) and we have 98% insurance coverage?

Further, how will these hospitals adapt under federal health reform when many newly eligible Medicaid patients start to utilize a system that underpays for their care? Currently, 1/3 of the state budget, or $10 billion+, goes to pay for Medicaid. The Feds will plug some of the increased cost under the new law for a few years, but will not be providing money for those that were previously eligible for coverage but did not sign up, the state will pick up that cost.

The Governor recently cut reimbursement for those staying in hospitals long-term (20+ days), and is counting on the $400 million pool mentioned above to cover the cost. The Feds paid a higher percentage of the cost of Medicaid under the stimulus, but the elevated reimbursement is set to expire this summer. The fiscal picture is grim, and the Medicaid program and the safety net hospitals simply provide a small snapshot.