A special commission in Massachusetts has produced a proposal to give hospitals some relief from uncompensated-care burdens by requiring health insurance plans to pony up annual contributions totaling $100 million.
The legislative blueprint also reserves approximately $85 million in additional state-controlled funding toward reimbursement of uncompensated care. But the new sources of funding fall short of meeting a rising liability for care of the indigent.
"Hospitals will not receive as much relief as we had sought," said Ronald Hollander, president of the Massachusetts Hospital Association and a commission member. "However, the overall proposal is worthy of broad support because it addresses most of our concerns about the stability of the healthcare safety net."
The commission proposal, which now goes to a state legislative committee, revises the way a statutory uncompensated-care pool is funded and managed. The state's hospitals had complained loudly during the past year that they're caught in a double squeeze because of managed care's hold on healthcare contracting.
The uncompensated-care pool, created in 1985 as a safety net for uninsured residents, is funded by a surcharge on hospital revenues from insurers and other payers.
But as healthcare reimbursement became characterized by negotiated flat rates instead of charges, hospitals were left to absorb the surcharge and ended up with sole liability for coming up with $315 million a year to fund the pool, the state hospital association argued.
Meanwhile, hospitals were on their own for rising free-care costs not funded by the state pool. The MHA said the current free-care bill for all hospitals is $480 million a year.
Still, Massachusetts' 96 acute-care hospitals were able to post a $258.6 million profit on combined net revenues of about $9.1 billion in 1995, according to the latest available figures from the American Hospital Association.
The new proposal provides for direct assessment on payers, including commercial insurers, HMOs, Blue Cross and Blue Shield plans and the self-insured plans of employers, said Andrew Dreyfus, an MHA spokesman.
Those new assessments would reduce the responsibility of the state's 80 hospitals to $215 million annually. In addition, the state would double its tax-supported pool contribution to $30 million a year from the current $15 million, Dreyfus said.
The state also would earmark an extra $70 million in new federal funds expected as a result of a Medicaid demonstration program.
The state enacted a healthcare reform package that expands eligibility for Medicaid coverage while seeking to control Medicaid costs through a managed-care style of healthcare delivery.