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Partnership in Peril: Federal Funding at Risk for States

Partnership in Peril: Federal Funding at Risk for States

February 17, 2017

Today, the Massachusetts Budget and Policy Center released a report highlighting the major federal funding sources received by the state to provide access to affordable health care, help children thrive, assist low-income families, and care for veterans.

According to the report, federal revenue currently accounts for approximately 25% of the Massachusetts state budget, totaling about $11 billion in state fiscal year 2017. Of that $11 billion, $9.44 billion comes in the form of reimbursement for state spending on Medicaid.  Federal funding for the Children’s Health Insurance Program brings in an additional $534 million. MassHealth, the state’s combined Medicaid and Children’s Health Insurance Program (CHIP), provides health insurance to 1.9 million Bay State residents, including over 645,000 children and hundreds of thousands of seniors and people with disabilities

A number of proposals expected to be debated by Congress in the coming months will certainly impact state budgets across the country, including Massachusetts.  The state’s MassHealth budget in particular faces three major threats:  repeal of the Affordable Care Act (ACA), major restructuring of the Medicaid program, and funding for CHIP.

The ACA contains a provision that expands Medicaid coverage to adults earning up to 133% of the Federal Poverty Level and increases the federal reimbursement rate for state spending on this population. The state will spend and expected $2.096 billion on the expansion population in 2017, with the federal government picking up 86% of the cost, or $1.824 billion (as opposed to 50% for most of the remaining Medicaid spending). The ACA also included a 23% enhanced matching rate for CHIP spending – increasing Massachusetts’ rate from 65% to 88%. If the ACA is repealed, Massachusetts could lose some or all of the $776 million in enhanced Medicaid funding, or even all of the $1.824 billion in federal reimbursement for the expansion population, in addition to the $139.6 million in increased CHIP reimbursement.

Congressional Republicans are also moving towards transforming federal Medicaid funding into a block grant or per-capita caps. If they are successful, rather than state’s receiving reimbursement for Medicaid spending, each state will instead receive a set amount each year – resulting in up to 25% in reductions to federal Medicaid funding for Massachusetts. These proposals simply shift health care costs from the federal government to state governments, forcing state policymakers to make difficult decisions, such as slashing eligibility, benefits and provider rates. In addition, MassHealth’s progress toward innovation – investing in keeping people health and changing the payment system to promote value – could also be constrained with the move to block grants or per-capita caps.

In addition, federal funding for the CHIP program expires in September, 2017. If Congress does not act to reauthorize and fund the program, the Commonwealth will be faced with the choice of picking up the state would have to pick up the full costs of this program, or reduce the number of children covered and the benefits they receive.

The MassBudget report drives home the point that all states, including Massachusetts, depend on a partnership with the federal government to share in the cost of providing health care to needy children, people living with disabilities, seniors, veterans, and low income and working families. If the ACA is repealed, if CHIP is not funded, or if Medicaid is gutted, Massachusetts will face significant budget challenges and difficult choices that could have devastating impacts on the ability of low-income individuals and families, children, seniors and people with disabilities to access health care services.