Health Care

The Senate Ways and Means (SWM) budget proposal recommends $12.52 billion for health care. This total includes $10.056 billion for MassHealth (Medicaid) and health reform,⁴ $637.7 million for mental health services, $476.1 million for public health, and $1.35 billion for state employee health insurance. Given that health care costs grow faster than inflation, this budget proposal is $478 million less than funding in the FY 2009 GAA, and hundreds of millions of dollars short of what would be necessary to continue FY 2009 services on at the same level into FY 2010. In other words, the SWM budget proposes deep cuts in the Commonwealth’s health care spending.

It is also important to keep in mind that cuts to the MassHealth program in particular -– or to other health care programs that are eligible for Medicaid reimbursement -– have significant impacts on revenues supporting the Commonwealth’s budget. Because of the American Recovery and Reinvestment Act (ARRA, the federal stimulus bill), for Fiscal Year 2010, Massachusetts receives an enhanced federal Medicaid reimbursement rate. Accordingly, for every state dollar saved from the MassHealth program in FY 2010, the Commonwealth loses on average $1.60 in federal revenues.

MASSHEALTH (MEDICAID) & HEALTH REFORM

The SWM budget proposes $10.056 billion for MassHealth and health reform. This is $333.9 million less than in the FY 2009 General Appropriation Act (GAA), and $517 million less than proposed by the House.

There are several significant cuts to the MassHealth program that are not obvious from just looking at the funding. Included in the budgetary language in the SWM proposal is the elimination of non-emergency adult dental services from the program. Adult dental services were first cut from the program in 2003, but they were restored with the passage of the state’s health reform law in 2006.

Also eliminated by the SWM proposal is funding for adult day habilitation services which provide support for people with developmental disabilities. There are estimates that this may be a cut of as much as $110 million in services for these 6,500 adults, most of whom have significant cognitive impairments. When coupled with proposed cuts to the services of the Department of Developmental Services (see below), the elimination of this benefit means a significant reduction in services for this vulnerable population.

Another significant cut within the SWM budget proposal is language stating that the Commonwealth Care program would no longer be available to people who “are not citizens of the United States.” There is some indication that this language may be far more restrictive than intended by SWM, since this would prohibit certain legal immigrants –- many of whom are currently legally entitled under federal law to receive Commonwealth Care program benefits –- from receiving health insurance from the Commonwealth Care program. The SWM budget anticipates that eliminating these 28,000 “aliens with special status” (as apparently intended) from the Commonwealth Care program would reduce costs by $128 million.

The SWM budget includes funding for children’s behavioral health in a new line item. This program, established as a result of a legal settlement (Rosie D. v. Romney) provides universal pediatric mental health screening, and services for children identified with significant mental health needs. Although these services received $25 million in the FY 2009 GAA, because the program is just getting started, there were estimates that the FY 2010 budget might need as much as $75 million to adequately serve this population. The SWM proposes $43.5 million for these services.

Like the House, SWM proposes $17.2 million for the Healthy Start program, which provides health care to otherwise uninsured low-income pregnant women and newborns. SWM and the House budgets also both fund the Children’s Medical Security Plan at $14.2 million, but unlike the House and the Governor, the SWM proposal does not include language which would allow the program to expand benefits that are currently restricted by the program’s statute.

The SWM budget also funds a separate MassHealth Senior Care Plans line item as in past years, and does not follow the Governor’s recommendation to consolidate the administration of these programs within the Office of Medicaid. Instead, they remain under the Executive Office of Elder Affairs. The SWM budget funds the Senior Care Plans at $2.093 billion, $65.4 million less than in the FY 2009 GAA. Unlike the House, the SWM budget does not include language with specific funding for long-term care pre-admission counseling and assessment. The SWM budget also does not include spouses in the definition of caregivers eligible for participation in the “Caring Homes” initiative which supports persons caring for elders in their homes in order to delay or prevent nursing home placement.

The SWM budget also does not include funding for the Community First initiative, a Medicaid waiver program designed to support community-based long-term care for elders and adults with disabilities who might already be living in institutional facilities, or who might be at risk of institutional care. Although this particular Medicaid waiver has not yet been approved by the federal government, there was $20 million appropriated for this initiative in FY 2009, an estimated $6.5 million spent, and these funds have been part of a larger initiative to support long-term care in community-based settings.

Like the Governor and the House, the SWM budget increases fees on nursing home providers by $75 million, from $145 million to $220 million. The language in the SWM budget proposal does not include recommendations for the use of the increased federal reimbursement that would be generated by this new assessment, whereas the House budget recommended using these funds for nursing home incentive payments.

The SWM budget—like the House—does not include funding for MassHealth outreach and enrollment grants. These grants, which provide funding for community agencies to assist persons in low-income communities with health insurance enrollment, were funded at $3.5 million in the FY 2009 GAA. Over the course of FY 2009, the Commonwealth Health Insurance Connector and the Mass. Health Education and Finance Authority were asked to assume $2.5 million of these costs. The SWM budget proposal includes language that would require these agencies to continue paying for these grants at that level.

The SWM budget does not include funding for primary care workforce development, funded at $1.7 million in the FY 2009 GAA and also included in the House budget proposal. One of the challenges in the implementation of the Commonwealth’s health reform has been the limited availability of primary care providers, particularly in certain areas of the state. This program provides funding for community health centers to develop financial incentives and recruitment strategies to encourage medical professionals to choose primary care.

The Prescription Advantage program in the SWM budget receives $30 million, compared to $45 million in the House budget and $57.5 million in the FY 2009 GAA. This health care safety net program provides prescription drug assistance for low-income elders and adults with disabilities who cannot otherwise afford to pay for medications.

Throughout the budget process, the Governor, the House, and now the Senate have differed on their recommendations for the structure and organization of the MassHealth program. The Governor had recommended significant reorganization and consolidations within the MassHealth program. The House rejected some of these suggestions, and SWM rejects even more. For example, the SWM budget returns to a funding structure that funds MassHealth according to particular program (for example, the MassHealth HIV plan, the MassHealth Essential Program, the MassHealth Basic Program) rather than by type of payment. (The Governor and House had recommended consolidating some of the programs under a “MassHealth Primary Care” account.)

The SWM budget also recommends consolidating information technology costs for all the health and human service programs as did the House and the Governor, and includes these consolidated costs within the Executive Office of Health and Human Services. (We include these costs in our MassHealth total.)

MENTAL HEALTH

Funding for mental health services in the SWM budget drops to $637.7 million, a $47.7 million, or 7 percent, cut from FY 2009 GAA funding levels. This is a further $13.4 million cut from the amount recommended by the House.

The SWM follows the Governor’s recommendation to consolidate mental health funding, combining four of the five adult mental health line items into one. Together, the SWM budget recommends $368.5 million for community-based adult mental health services, a 5 percent ($20.5 million) cut from funding in the FY 2009 GAA. This final House budget recommended $73.1 million for adult mental health services. The SWM budget also cuts funding for inpatient facilities and community-based residential adult mental health services, recommending only $169.9 million, compared to $181.9 million in the FY 2009 GAA.

The SWM budget also dramatically cuts children’s and adolescents’ mental health services, recommending $69.7 million for these community-based services, a $6.5 million cut from the FY 2009 GAA which is a 9 percent drop. Although the budget language includes mention of the Child Psychiatry Access Project, which provides psychiatric consultations to primary care providers, but does not provide a specific funding level.

PUBLIC HEALTH

The SWM budget recommends $476.1 million for public health funding, a 20 percent cut from funding at the beginning of Fiscal Year 2009. Funding in the FY 2009 GAA totaled $594.5 million, but there was $33.4 million cut from public health services over the course of the FY 2009 9C budget reductions, such that current FY 2009 public health funding totals $563 million. The SWM public health budget is 7 percent below the levels recommended in the final House budget. Even if we estimate that this total reflects approximately $8 million in technology costs shifted from the Department of Public Health into the Executive Office of Health and Human Services, the cuts to public health programming are still dramatic.

Funding for public health hospitals totals $159.4 million in the SWM budget when adjusted for an estimated $2.4 million in technology funding transferred into the Executive Office of Health and Human Services. This compares to $166.1 million in the FY 2009 GAA, and $159.8 million in the House budget proposal.

Community-based public health programs, however, are particularly hard hit by cuts in the SWM budget. Total non-hospital based public health funding is $311.5 in the SWM budget, adjusting for technology transfers. The FY 2009 GAA total was $428.4 million, but 9C cuts reduced this total by $30.4 million. The FY 2010 House total recommendation for community-based public health programs was $342.8 million.

One of the strategies built into the SWM budget to cut costs to the state is to shift certain expenses. In funding for immunizations, the SWM budget includes language requiring health insurance companies to pay for the costs of purchasing and distributing childhood vaccines. Similarly, in the early intervention program, there is language shifting certain costs of the program to health insurance providers (see discussion below.)

The programs that are hardest hit in the SWM budget include:

• Youth violence prevention programs, which receive no funding in the SWM budget proposal. In the FY 2009 GAA, these programs received $9.3 million.
• Smoking prevention services, which are cut from $12.8 million in the FY 2009 GAA to $5 million in the SWM budget. This 61 percent cut is the lowest level of funding for smoking prevention since FY 2006.
• Family health services, which receive $4.8 million in the SWM budget, a $2.9 million (38 percent) cut from the FY 2009 GAA.
• Sexual assault services are cut by $2.3 million, from $6.4 million in the FY 2009 GAA to $4.1 million in the SWM budget.
• Substance abuse services, which are funded at $63.5 million in the SWM budget, a 30 percent reduction from funding in the FY 2009 GAA. With such a significant reduction in state funding for these services, there is a serious risk that the Commonwealth might be jeopardizing matching federal funding. This, in effect, would double the impact of the SWM proposed budget cut.
• School health services are funded at $13.4 million, a 23 percent cut from the FY 2009 GAA.
• Early intervention services receive $23.1 million in the SWM budget. This is a total of $26.4 million less than in the FY 2009 GAA and represents a significant cut in services for developmentally delayed infants and toddlers. However, there are some important shifts in funding for this program that make a direct comparison difficult. In FY 2010, the House and SWM budget proposals both recommend shifting a portion (approximately $8.2 million) of early intervention costs into the MassHealth budget, in order to capture federal Medicaid reimbursement for eligible program participants. Presumably, the $7 million earned and spent by the program in FY 2009 for Medicaid-eligible children would also shift into the Medicaid budget. Furthermore, the SWM budget includes language that would lift a cap that currently limits the early intervention benefits paid for by health insurance. Even with the shifts in funding to MassHealth and to other insurance, the early intervention funding proposal is inadequate to support the needs of these vulnerable young children. Added to this concern is that if the Commonwealth does not provide sufficient state funding for early intervention services, close to $11 million in federal revenue for early intervention services would be at risk.

STATE EMPLOYEE HEALTH INSURANCE

The SWM budget recommends a total of $1.35 billion for state employee health insurance costs, $102.9 million less than in the FY 2009 GAA, accounting for certain adjustments. This includes approximately $950.3 million in funding for employees who participate in the Group Insurance Commission (GIC), $27.7 million for other employees, and $372 million transferred to the State Retiree Benefits Trust.

The majority of Group Insurance Commission (GIC) appropriations are spent on one account, which covers the cost of providing benefits to current employees and some retirees. The SWM budget recommends $860 million for this account, the same as recommended by HWM prior to floor debate which added an additional $119.1 million.

The most significant issue in the SWM budget proposal is a shift of $148 million of costs onto state employees. The SWM budget recommends that all current state employees contribute 30 percent of their health insurance premiums. Currently, state employees hired before June 30, 2003, pay 15 percent of their health insurance premiums and employees hired after that date pay 20 percent. In the SWM proposal, all state employees would pay 30 percent of their premiums. The final House budget, in contrast, recommended that current state employees would pay 20 percent of their premiums, and any new employee hired after June 30, 2009 would pay 30 percent.

Also included in the FY 2010 budget total are the costs associated with health care for certain municipalities that are now joining the GIC in order to participate in the state’s employee health insurance system. In July 2007, a new law was enacted allowing municipalities and other public employers to join the state’s health insurance plan. Some cities and towns are now purchasing health insurance for their employees through the GIC.

Fifteen municipalities are expected to join the GIC in FY 2010. The GIC anticipates spending approximately $120 million in FY 2010 for health insurance premiums for these new participants. The state, however, will be reimbursed for these premiums over the course of the year by the new participants’ municipal employers. In addition, several new municipalities and public employers joined the GIC in FY 2009. There are estimates that the costs of health insurance premiums for these employees will increase by $5 million in FY 2010. In addition, SWM budget transfers funds from the GIC budget to a new technology line item. As with the House budget, the SWM budget reflects the savings due to a transfer of approximately $1.3 million that in FY 2009 would have been included in the GIC budget.

4. In this Budget Monitor, "MassHealth (Medicaid) and Health Reform" is itself divided into several components (see accompanying table). "MassHealth" includes the line item appropriations within the Office of Medicaid, as well as administrative costs associated with the Executive Office of Health and Human Services. It also includes an FY 2009 reserve to support the Children’s Behavioral Health Initiative (also known as Rosie D. funding). MassHealth totals also include MassHealth elder long-term care dollars that in some years have been within the oversight of the Executive Office of Elder Affairs. Because of proposed consolidations by the Governor and HWM, MassHealth totals now also include the funding for the Essential Community Provider Trust. Funding for health reform includes funding transferred from the General Fund into a variety of "off-budget" special trust funds that are used to finance a large portion of the Commonwealth’s health care programming – particularly the costs associated with the health insurance program created by health reform and costs of the health safety net (formerly referred to as uncompensated care). "Pharmacy Program" is the Prescription Advantage program administered by the Executive Office of Elder Affairs. The totals for "Health Care Finance & Other Initiatives" include the administrative costs associated with the implementation of health care reform, the costs of the Division of Health Care Finance and Policy, the Health Care Quality and Cost Council, and the costs of certain health care cost containment initiatives.