Democrats and Republicans in Massachusetts have devised healthcare subsidy plans that differ in mechanics and philosophy, but they agree on one pivotal point: The money should come mainly from a $330 million fund meant for providers.
The subsidies are woven into proposals competing to replace a universal-coverage provision of a law passed in 1988 and effective Jan. 1, 1995. The law, crafted during the presidential election campaign of then-Gov. Michael Dukakis, requires employers to provide insurance for workers or make contributions to a state pool.
Both Gov. William Weld, the Republican who succeeded Mr. Dukakis, and Democratic leaders in the state Legislature have voiced varying degrees of objection to the law's burden on business, and they're seeking other ways to make insurance coverage available to the state's 600,000 uninsured residents. Both bills were introduced earlier this month.
Among other provisions, Mr. Weld's proposal counts on tax credits to induce employers to provide insurance, and it creates tax-exempt medical savings accounts for workers so they can save for out-of-pocket costs.
Democrats want to keep the employer mandate on the books but also want to directly subsidize insurance premiums for lower-income working or unemployed people by creating two state funds, one for a children's health insurance plan and another for uninsured adults.
The Democratic proposal relies on diverting $200 million a year from the state's uncompensated-care fund, which provides $330 million to defray the costs of free care provided to those who don't have insurance. The Republican plan envisions using $280 million from the fund to avoid raising taxes.
The Massachusetts Hospital Association is worried that the uncompensated-care fund will be drained before the insurance-fostering provisions of a healthcare reform plan can take hold. That would put the state's 85 acute-care hospitals at risk for shouldering substantially more than the estimated $150 million to $200 million in free care and bad debt they already absorb even with the state subsidy, said Alison Sneider, the MHA's vice president for communications.
The hospital association is advocating a transition plan that adequately funds the pool while the healthcare system goes through its restructuring.
The uncompensated-care fund, established in 1986, dates back to a regulatory era when hospital rates were set and provisions for free care were made through a surcharge on hospital bills, currently about 6%. The percentage is calculated to yield a target amount annually for the fund, Ms. Sneider said.
But in the past two years, the state has dropped most regulatory features in favor of market competition, and managed-care penetration has risen to about 40%. Market pressure has forced hospitals to absorb the surcharge instead of passing it along to patients or insurers, she said.
A combination of liability for the surcharge, decreasing access to the proceeds and rising numbers of laid-off workers would compound the pressure imposed by uncompensated care.