Values, Leadership -- and Economics
Last week, Governor Patrick showed us why his values and leadership matter. On Monday, he directed state officials to take steps to save the Medical Security Program. On Friday, when the state learned it was receiving an unexpected $82 million tax settlement, he again took action. With the funds, the Governor announced the state was canceling planned cuts in MassHealth, homeless programs, and domestic violence crisis centers.
Acting Medicaid Director Terry Dougherty shared the news:
Based on this additional revenue, the Governor has instructed the Office of Medicaid to cease implementation of recently announced plans to limit services and increase co-payments in the MassHealth program.
To summarize: the adult dental program, podiatry services, PCA services, and day habilitation services will all remain intact and provided without limitations or restructuring of the benefit. Rates will not be reduced for day habilitation programs, adult foster care, community health centers, and clinical labs. There will be no additional co-payments on office visits, dental services or non-emergency transportation, and co-pays will not be increased on the pharmacy products.
No doubt, we continue to face significant budget challenges, but this unexpected opportunity will afford us some additional breathing room so that we can maintain our current level of services and supports for MassHealth members at this time.
Some were critical of building spending based on one-time revenue sources. But the Governor’s actions were more than humane; they also were smart economics for the state.
Just as the federal government should be running a deficit during an economic downturn, to promote demand and support long-term growth, states should be prudently avoiding cuts as much as possible. Avoiding MassHealth cuts does more than provide vital services to poor people. It saves jobs and builds our economy back.
This is particularly true because of the enhanced federal match the state is currently receiving for MassHealth. While we normally get a 1-for-1 match for Medicaid spending, under the stimulus law the state gets $61 in federal revenue to match $39 that is spent from state funds. Thus in order to save the state budget $20 million, cuts in services of over $51 million must be made. If the cuts are not made, the federal revenue is able to support the state budget, and as it is spent, the federal revenue enters the economy and promotes jobs and growth.
To save the Medical Security Program, the administration included an increased in the assessment paid by employers. The assessment has been frozen since 1988, and employers have enjoyed the steady decline in the real value of the assessment over the past two decades.
The increase in the assessment signals the next steps we must consider in building a back our capacity to serve the human needs of the state. Our tax system has become unbalanced. The sales tax targets individuals, and exempts a number of business services that most states include. A study found that the business share of general sales taxes nationally were 1.1 percent of state private Gross Domestic Product (GDP). In Massachusetts this was only 0.5 percent. Overall, our business taxes in 2007 were $1.5 billion lower than they would have been if the Commonwealth was at the national average for business taxes as a share of GDP. (source, and more details: Mass Budget and Policy Center).
As we rebuild our economy, we must also rebuild a tax structure that fairly calls on everyone to contribute to our common goals. There is more to be done. We must end the discriminatory second-class health program we are providing to legal immigrants. Public health investments must be restored. We can save money and improve health quality by restructuring our health payment system. But for now, we are grateful for the Governor's values and leadership.