September 15, 2008
By Greg D'Angelo
Three years ago, faced with the prospect of losing hundreds of
millions of dollars in federal Medicaid funding, Massachusetts made
a deal with Washington. No longer would those funds go directly to
two "safety net" hospitals with little transparency or
accountability. The money - along with anticipated reductions in
uncompensated care - would, instead, be redirected toward helping
the low-income uninsured buy health insurance.
This shift in priorities and financing, enabled by a Medicaid
demonstration "waiver," was a key part of the compromise that
brought the feds, the state and a diverse coalition of interests
together on health reform. Of course, few could object to an
approach that put the needs of patients before providers and that
was designed to extend coverage to the uninsured without new taxes
or new government spending.
The basic principle of the Massachusetts health reform was
simple: As the share of funding going to subsidize coverage for
low-income individuals increased, more hospital services would be
paid through health plans. Uncompensated care costs and hospital
supplemental Medicaid payments would decline, and the need for
direct subsidies would disappear.
Yet two years into the implementation of the landmark reform,
special interests are already undermining the plan. Despite the
enrollment of 175,000 members in the new Commonwealth Care
subsidized insurance program and a similarly healthy decline in
hospital uncompensated care visits, Massachusetts politicians have
continued to make special, direct Medicaid payments to the two
hospitals, Cambridge Health Alliance (CHA) and Boston Medical
Why? "The number of visits by needy, low-income populations has
not declined," CHA argues. But guess what? They were paid for those
visits - a detail the hospital conveniently omits. The only issue
is whether hospitals should be paid twice for treating patients.
Certainly, that wasn't part of the deal.
With Massachusetts' waiver up again for renewal in Washington,
now is not the time for the state to forget the past or the deal it
made with federal officials as to how Medicaid dollars would
CHA and BMC are, indeed, important institutions. That's why both
hospitals were given a one-year grace period for direct payments to
continue. That's also why under the reform law they were granted
additional special considerations, including substantial rate
increases and market exclusivity for three years to enroll the
newly insured in their health plans. In fact, the insurance
subsidiaries of CHA and BMC have largely been the direct
beneficiaries of the reform's shift in funding; their combined
enrollment in the Commonwealth Care program tops 142,000 members,
accounting for roughly $650 million in annual revenues.
But the preferential treatment didn't end there. The reform
changed how most other hospitals were to be reimbursed for residual
uncompensated care to the remaining uninsured, but not other
multi-million dollar supplemental payments to CHA, BMC and a few
Still, some Bay State politicians believe these two institutions
are too important to stay true to the reform's intent.
Instead of changing their business strategy to adapt to earning
more of their income from treating insured patients, CHA and BMC
opted to pursue a political strategy to preserve as much of their
old, direct subsidies as possible. In the 2006 legislation that
enacted the reform -separate from the state's agreement with
Washington - Massachusetts politicians at the last minute earmarked
the same old direct subsidies under a new name to both
This three-year political deal was a promise with a heavy price
tag - $200 million the first year, declining by $20 million each
year thereafter. In spite of the reform's intent, Bay State
politicians - through a now-infamous "hold harmless" provision -
sought to continue direct Medicaid payments with the sole intent of
protecting the profits of their political friends.
By continuing to pay out more than it should in direct subsidies
to hospitals, Massachusetts is now in a $150 million budget bind
that recently became the justification for new, unnecessary taxes
on businesses. And in negotiations with federal officials over its
waiver renewal, the state is asking for more federal money to help
solve a budget problem it created entirely on its own.
President Bush, take note: An unnecessary state bailout of
politically connected hospitals should not be rewarded with an
unnecessary federal bailout of a state. If Massachusetts chooses to
pile up new taxes, the federal government should not support it by
matching new state spending.
Rather than looking to federal or state taxpayers for more
money, Beacon Hill needs to make it clear to special interests that
health reform actually means reform - not business as usual.
Nevertheless, in defense of continuing its direct payments, BMC
uses a non sequitur to argue that eliminating them - as the reform
intended - would mean the end of other services, such as its "food
Now, no one questions the importance of serving hungry people on
the streets of Boston. But that's not what the Massachusetts health
reform was about or what Medicaid dollars are for. BMC's
implication is that the city of Boston, the Commonwealth of
Massachusetts, and the federal government will let people go hungry
unless federal taxpayers are coerced to fork over more cash to its
institution. Sure, BMC has made a considerable investment expanding
its facilities in recent years. But what's next, defending the
payments as a means of mitigating the housing crisis?
If Massachusetts politicians want to continue CHA's and BMC's
special, direct subsidies with state and local dollars, that's
their choice. But they should have to justify it to their
constituents. Federal taxpayers should not be required to deliver
on the Bay State's political promises
is a policy analyst at the Heritage Foundation's Center for Health
First appeared on Fox News
Three years ago, faced with the prospect of losing hundreds of millions of dollars in federal Medicaid funding, Massachusetts made a deal with Washington. No longer would those funds go directly to two “safety net” hospitals with little transparency or accountability. The money — along with anticipated reductions in uncompensated care — would, instead, be redirected toward helping the low-income uninsured buy health insurance.
Read More >>
Heritage's daily Morning Bell e-mail keeps you updated on the ongoing policy battles in Washington and around the country.
The subscription is free and delivers you the latest conservative policy perspectives on the news each weekday--straight from Heritage experts.
The Morning Bell is your daily wake-up call offering a fresh, conservative analysis of the news.
More than 450,000 Americans rely on Heritage's Morning Bell to stay up to date on the policy battles that affect them.
Rush Limbaugh says "The Heritage Foundation's Morning Bell is just terrific!"
Rep. Peter Roskam (R-IL) says it's "a great way to start the day for any conservative who wants to get America back on track."
Sign up to start your free subscription today!
The Heritage Foundation is the nation’s most broadly supported public policy research institute,
with hundreds of thousands of individual, foundation and corporate donors. Heritage, founded in
February 1973, has a staff of 275 and an annual expense budget of $82.4 million.
Our mission is to formulate and promote conservative public policies based on the principles of free
enterprise, limited government, individual freedom, traditional American values, and a strong national
defense. Read More
© 2014, The Heritage Foundation Conservative policy research since 1973