A Healthy Blog

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

New Report Shows MassHealth Spends Less State Funds Than You Think

New Report Shows MassHealth Spends Less State Funds Than You Think

November 19, 2014

Chart showing total MassHealth budget and net cost to state

On a day when the Governor announced over $50 million in MassHealth Medicaid cuts (details here), the Massachusetts Budget and Policy Center (MassBudget) and the Massachusetts Medicaid Policy Institute (MMPI), released a new budget brief, Understanding the Actual Cost of MassHealth to the State. The brief details the true “net” cost of MassHealth to the state after accounting for federal reimbursement.

The main takeaway: Since MassHealth is jointly funded by the state and federal governments, much of the program is actually paid for by the federal government.

Key points:

  • This year, MassHealth will provide health insurance coverage for 1.7 million low and moderate-income Massachusetts residents – roughly 25% of the state population, resulting in MassHealth taking up a large portion of the state budget…before taking into account federal funding.
  • The FY2015 state budget includes $14.7 billion for MassHealth and health reform programs – 37% of the state budget. Federal revenue from these programs is projected to be $7.7 billion in FY2015, reducing the net cost of MassHealth and health reform to just 23% of the state's budget dollars.

Because of the federal government picking up at least half of the cost of the program, today's budget cuts must reduce services in dollar terms at least twice as much as they need be in order to get the needed savings. In other words, the state needs to eliminate $100 of health care spending to save the state budget $50. This makes cuts in MassHealth particularly inefficient, or particularly painful.

As usual, MassBudget and MMPI help to paint a more complete picture of the MassHealth program – who it serves, how it works, and how much it really costs.

  - Suzanne Curry