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Massachusetts health care — wonky, with a healthy dose of reality

Breaking the Boom-Bust MassHealth Funding Cycle

Breaking the Boom-Bust MassHealth Funding Cycle

February 22, 2012

Last week, the Mass Medicaid Policy Institute released another policy brief entitled Stabilizing MassHealth Funding: Options to Break the Recurring Cycle of Expansion and Contraction (pdf).

MassHealth (Massachusetts’ Medicaid program) is counter-cyclical in nature. When state economic growth slows and people lose their jobs (and their employer-sponsored health insurance), the low-income population needing health care coverage from MassHealth grows. And, as the economy weakens, revenues available to cover the state share of the cost of MassHealth shrink, just as the need for coverage increases.

The MMPI paper discusses options within state government control for reducing the reactive swings in MassHealth funding and scope of services that come with each economic downturn. The report advocates for the importance of a stabilizing mechanism specifically for MassHealth because of:

  • its entitlement nature, which limits the state’s spending discretion;
  • its size, accounting for about 30 cents of every state budget dollar;
  • the concurrent loss of federal Medicaid revenue resulting from any cuts made to the program;
  • the impact of cuts on the health care sector, an economic engine of the state’s economy; and
  • the impact on a program that over 20 percent of state residents depend upon for their health care needs.

Thus, MMPI suggests three potential options for stabilizing mechanisms, each intended to meet the goals of improving MassHealth’s long-term planning abilities, including robust oversight and transparency, and applying lessons learned from past experiences.

  • Establish a Medicaid Stabilization Fund: This Fund could serve as a MassHealth- specific “rainy day fund.” A portion of additional federal money flowing to the state under the ACA, plus any appropriated but unexpended MassHealth dollars from a given fiscal year, could be retained in the Fund.
  • Adopt Multi-year Budgeting for MassHealth: Adopting this practice for just the MassHealth program could allow MassHealth time to invest in improvements and infrastructures that would ultimately have a bigger impact on containment of costs.
  • Create a Public Authority: Converting administration of MassHealth from an executive branch agency to a public authority could allow more flexibility for longer-term financial arrangements and the program stability that comes with it.

A stabilizing mechanism could not only ensure the long-term stability of MassHealth, it could also benefit other health and human service agencies, hospitals, other health care providers, and businesses that may otherwise be called on to absorb some of the consequences of decreasing Medicaid funds.
-Suzanne Curry