Massachusetts hospital industry executives were giddy over the prospect of the passage of a near universal healthcare bill that, along with mandating many of the state's uninsured to buy health coverage, would provide $230 million in new Medicaid reimbursement to them over a three-year period. But they were unsure if the plan would help limit the $310 million in bad debt the state's hospitals rack up each year.
Physicians would benefit by receiving an additional $40 million in Medicaid funds over three years starting July 1, 2006. Insurers, which will be offering new health plans, would benefit by seeing an increase in their number of enrollees that could total 215,000.
After months of hand-wringing, the state Legislature overwhelmingly passed the bill last week, with the intention that it would cover 515,000, or an estimated 95%, of the state's uninsured over three years.
Gov. Mitt Romney is expected to sign the bill as early as this week and the CMS must approve the plan in order for the state to be granted $385 million in annual federal funds, which are essential to the program's rollout.
"When we started this process we had a vision for what we hoped reform would look like and I think we are very pleased," said Ron Hollander, president of the Massachusetts Hospital Association. "This seems to be a very strong step along the lines of what our vision looked like."
The number of uninsured in Massachusetts range from 550,000 in state estimates to 748,000 in federal estimates. The federal numbers put the rate of uninsured in the state at 10.8% -- the eighth lowest in the country -- while the state numbers would put the rate at about 9%.
To provide coverage to those uninsured the plan passed by the Legislature would:
The new plans are to be administered by a state agency. Since the plans haven't been developed, hospitals aren't sure how they would affect their bad debt. People below 300% of the poverty line wouldn't have deductibles and that could lower bad debt.
But those above 300% of the poverty line would likely have high copayments and deductibles under the plan that could be difficult for hospitals to collect, according to the state hospital association.
But the challenge will be to offer affordable plans that aren't so bare-boned that the problem of the uninsured becomes the problem of the underinsured. Romney had talked about using health plans with $200-a-month premiums, which is considered a stripped-down plan.
If the coverage plans don't cover the cost of care, the concern for the provider becomes: Who is going to pick up the price of care, said Peter Markell, vice president of finance for Partners HealthCare System in Boston. One way providers can help keep the new health plans from being too expensive is by offering discounts to insurers who establish the new plans, Markell said. He said that the Medicaid increases could also help lower the prices that insurers pay hospitals. The higher Medicaid payments will bring reimbursement to about 90% of the cost of care from about 80%, according to Hollander, and that could prevent some cost-shifting to private insurers. For example, in some of Partners' contracts with insurers, "there's a direct correlation in what we charge them with what we get from national payers," Markell said.
Most indications are the governor is happy with the bill and he could sign it by April 12. However, he could request amendments and some said he may be looking at lowering the amount businesses not offering insurance have to pay under the current form of the bill. Employers that don't offer insurance and have 10 or more employees must pay the health plan $295 per employee.
Alan Sager, director of the health reform program at the Boston University School of Public Health, doesn't believe the Medicaid increase will serve as a cost control because the logic "assumes they (providers) ask for the money they need while most think they ask for what they can get," Sager said. He said the bill's large failing is it doesn't include any cost controls and funding for the program won't be able to keep pace with the rising cost of healthcare.
The Massachusetts Medical Society, which said it's long been in favor of individual mandates, also applauded the bill, but it didn't have any information on how it would affect the free care that physicians give.
Employers can call it a victory because they aren't being hit with an across-the-board mandate, which has typically been the case in past coverage expansion efforts. The bill has something to offer both universal healthcare advocates -- a large portion of the uninsured can potentially receive coverage -- and pay-for-performance advocates -- increased Medicaid payments starting July 1, 2007, to hospitals and physicians would be tied to quality measures.
Insurers were in favor of the bill, and their national trade association, America's Health Insurance Plans, issued a statement saying they are eager to work with its members to develop the new health plans.
Insurers are excited about the individual mandate because it creates a law that makes the uninsured purchase health plans or face a penalty, said Jerry Flanagan, healthcare policy director for consumer group the Foundation for Taxpayer & Consumer Rights. Flanagan said if adopted nationally the largely for-profit insurance industry would be able to gouge the uninsured.
Massachusetts had to come up with a plan to lower the number of the uninsured in order to receive access to $385 million in annual federal funds, which are part of a waiver for a Medicaid demonstration project to reduce the number of the uninsured.
The CMS still has to approve the plan before releasing the funds, which essentially served as a carrot by drawing hospitals, consumer advocates, businesses and insurers to the same table, said Rachel Rosen DeGolia, organizing and operations director for the Universal Health Care Action Network, a consumer group.