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Is MassHealth Really Unsustainable?

Is MassHealth Really Unsustainable?

April 12, 2015

Administration officials from the Governor on down have been repeating the mantra over the past few months - MassHealth is "unsustainable."  Last Monday, EOHHS held a big public input session, titled, "Creating a Sustainable MassHealth Program."

Yes, MassHealth takes up a large portion of the state budget (but not as large as you think). And yes, MassHealth has seen spending increases over the years (but what part of the health care system hasn’t)?

But, does that make the MassHealth program unsustainable?

Let’s look more closely at the facts.

MassHealth is the foundation of the Massachusetts health care system. The program covers approximately 1.9 million low-income Massachusetts residents – providing access to critical medical, behavioral health and community-based services. It brings in about 80% of all federal revenue the Commonwealth receives and has a large impact on the economy.

MassHealth’s spending increases have been primarily driven by enrollment. The Commonwealth wisely expanded coverage through several reforms over the years, most recently by implementing the Affordable Care Act (ACA) Medicaid expansion to cover low-income adults. Many of these new enrollees were simply switching to MassHealth from Connector-based programs. So MassHealth spending grows, as Connector spending goes down. And, as a bonus, we collect more federal revenue.

While these points were acknowledged at last Monday’s MassHealth stakeholder meeting, the conversation was framed around a single focus: MassHealth is unsustainable. The centerpiece was this complex chart, which mixes lots of disparate numbers:

EOHHS chart - MassHealth "Unsustainable"

While this chart seems to be all bad news, with costs soaring, that's not what it says.

From a state fiscal point of view, the key number of consequence is the net state cost - the actual cost of the program to the state budget. That's the total cost, minus the federal revenue, shown in the dark blue line at the bottom of the chart. And the growth rate in net state costs is declining sharply. The dark blue circles above, isolated in the chart below, is good news:

MassHealth Net state cost growth rate declining

Here's what's happening in the charts. Due to the ACA, we're covering more people in MassHealth. But increasingly, more of the added cost is coming from federal sources, not the state budget. So MassHealth is becoming more, not less sustainable from a state budget point of view.

And, the increasing federal share is a big bonus for the overall state economy. Many studies have looked at the multipler effect of Medicaid spending. They all show that Medicaid spending increases leads to increased economic activity, including more jobs and increased state and local revenues.

This is not say MassHealth should not look for efficiencies. Of course - it must always. And improving overall health and patient outcomes through more care coordination, by changing how providers are paid to reward value, and by imtegrating mental and behavioral health as appropriate for patients are the right things to do regardless of the impact on spending. We strongly support these initiatives started by the Patrick administration and being carried forward now.

But when one looks at the ability of the state to afford, say, full restoration of dental benefits for adults on MassHealth, it's clear that the "MassHealth is unsustainable" catchphrase does not add any clarity to the analysis.

        - Suzanne Curry and Brian Rosman