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Overhaul of Massachusetts Medicaid Program Approved


Email Alert

November 28, 2016

By Martha Wrangham*

On November 4, 2016, the federal government approved a waiver enabling Massachusetts to implement extensive changes to MassHealth, the state Medicaid program, in an effort to rein in costs while improving the quality of care. MassHealth currently provides health coverage to almost 2 million low-income residents and, at over $15 billion or almost 40% of the state budget, constitutes Massachusetts’ single largest expense.

Massachusetts Governor Charlie Baker proposed the waiver to the federal government in June 2016. In approving the proposal, the Centers for Medicare and Medicaid Services (CMS) agreed to provide more than $52.4 billion in funding to MassHealth over a five year period beginning July 2017. Without the waiver, Massachusetts would have started losing approximately $1 billion in federal funding each year starting July 1, 2017. 

The waiver gives Massachusetts the opportunity to restructure MassHealth, and the changes Governor Baker has planned will constitute the most sweeping changes MassHealth has seen in 20 years. In a statement, Baker said that these changes “include[] critical reforms to promote coordinated care, hold providers accountable and offer expanded access for substance abuse disorder services driven by the opioid crisis.” Marylou Sudders, Secretary of the Massachusetts Department of Health and Human Services, lauded the plan, saying “[o]ur restructuring will improve health care for 1.9 million MassHealth members and ensure a strong health care program now and in the future.”

The restructuring plan invests in shifting away from the current fee-for-service system, turning instead toward an Accountable Care Organization (ACO) model that would pay set budgets to health care providers. The U.S. Department of Health and Human Services (HHS) describes the ACO model as “creat[ing] incentives for health care providers to work together to treat an individual patient across care settings—including doctor’s offices, hospitals, and long-term care facilities.” This shift by MassHealth is intended to encourage improved patient care while curbing spending—a move that represents “another step forward in the American health care system’s shift toward value,” according to HHS Secretary Sylvia M. Burwell. A key aspect of the ACO model is the integration of social services and community-based organizations into the delivery of health care, which enables a stronger focus on behavioral health and mental health services. Pursuant to the waiver, MassHealth will launch an ACO pilot program in December 2016. The pilot program will facilitate MassHealth’s transition to the ACO model by creating “an alternative payment methodology that includes shared savings and risk.”

The waiver approves $1.8 billion in federal funding over the five-year period for investment in a Delivery System Reform Incentive Program (DSRIP), which would be geared toward supporting Massachusetts’ transition to the ACO model. In addition, nearly $6 billion in funding would be channeled toward “safety net care payments . . . to hospitals and the health safety net for the uninsured and underinsured, and for subsidies to assist consumers in obtaining coverage on the Massachusetts Health Connector,” an independent state agency dedicated to helping residents find health plans. The waiver will expand the number of safety net hospitals that can be reimbursed for uncompensated care from seven to 15.

Overall, the governor’s office has articulated five goals for the waiver:

  1. Restructuring the current MassHealth delivery system in a manner that promotes integrated, coordinated care and holds providers accountable for quality and total cost of care of its members;
  2. Improving integration among physical health, behavioral health, long term services and supports, and health-related social services;
  3. Maintaining near-universal health care insurance coverage (leading the country with the highest rate of insured state residents, Massachusetts currently experiences an uninsured rate of less than 3%);
  4. Addressing the opioid addiction crisis by expanding access to a broad spectrum of recovery-focused substance use disorder services; and
  5. Sustainably supporting safety net providers to ensure continued access to care for Medicaid and low-income uninsured individuals.
The waiver has received criticism from hospitals and other stakeholders, who argue that MassHealth already fails to cover their costs at reimbursement rates of 76 cents per dollar of care provided. Critics also say that the incentives driving MassHealth’s shift away from a fee-for-service model, such as reducing coverage for certain services or restricting access to specific doctors, could negatively impact some residents’ access to the health care they need.

Nonetheless, both state and federal government leaders have voiced their support for the waiver. “The waiver allows us to implement a nationally-leading model of accountable, coordinated care which better serves members and recognizes the importance of integrating social services and community-based expertise into delivering health care,” explained Dan Tsai, Assistant Secretary of the Massachusetts  Department of Health and Human Services. “We appreciate the support and engagement from the Massachusetts health care community and are committed to continued stakeholder input throughout the implementation of these reforms.”

*We would like to thank Martha F. Wrangham, JD (Squire Patton Boggs, Denver, CO) for authoring this email alert. We also would like to thank Nazanin Tondravi, JD, MPH, LHRM (University of Miami Health System, Miami, FL) for reviewing this alert.

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