Health care reform costs, BMC and Cambridge Health Alliance

By Jim Stergios
July 11th, 2008

[I]f there is a state budget problem, it is not the result of increased enrollment in Commonwealth Care but rather of the state failing to fully comply with the basic waiver agreement to shift subsidies from health care providers to individuals needing assistance in buying health insurance.

That’s a clear indictment from Greg D’Angelo and Edmund F. Haislmaier of the Heritage Foundation in the just released policy piece entitled Health Care Reform in Massachusetts: Medicaid Waiver Renewal Will Set a Precedent.

The Health Care Reform Act However included hold harmless payments for the Boston Medical Center and Cambridge Health Alliance (so-called Section 122 payments). The payments “were authorized for three years starting at $200 million for FY 2007, declining by $20 million each year.” D’Angelo and Haislmaier note that:

Had initial enrollment in Commonwealth Care come in at or below projected levels, these Section 122 payments would likely not have created a financing issue. But with enrollment running higher than expected, the state has already obligated elsewhere hundreds of millions of dollars that it should otherwise have available to meet the added cost of providing subsidized coverage to more individuals. In FY 2008, Section 122 payments come to $180 million, while Commonwealth Care overruns are $153 million.

D & H finally note that

State payments for uncompensated care do not seem to have decreased as much as these trends suggest they should have. One explanation may be that some hospitals are attempting to compensate for providing less uncompensated care by charging the state higher rates for the uncompensated care they still provide.

Interesting work — and the timing is impeccable given the waiver discussions.