Last September, we reported on how MA was explaining health reform to Wall Street in their official bond documents — read here. On 12/12/06, state officials submitted an “information statement supplement” including updated financial information on many aspects of state spending, especially related to health reform. Here are some parts which caught our attention:
For fiscal 2006, the legislation appropriated or transferred from the General Fund $60.0 million to fund its provisions, including: $25.0 million to establish the Connector, $14.5 million to expand and restore prevention programs at the Department of Public Health, $10.0 million for a reserve to fund additional administrative costs of various agencies … For fiscal year 2007 the legislation is projected to result in a total of $1.637 billion in spending in categories of activity affected by the legislation. Net cost to the Commonwealth (after accounting for federal reimbursement) is projected to be approximately $265.5 million in fiscal 2007, an increase of $267.7 milion from fiscal 2006. The elements of this projection include the following estimates:
* $162.5 million for expanded MassHealth eligibility and member benefits
* $568.8 million in Uncompensated Care Pool payments.
* $506.0 million in acute hospital supplemental payments.
* $90.0 million in hospital and physician rate increases (The legislation provided for $90.0 million in rate increases for acute hospitals and physicians; the rate increases will cost $70.9 million in fiscal 2007, as hospital rate increases were implemented October 1, 2006 to correspond with the hospitals’ rate year whereas physician rate increases were effective July 1, 2006.)
* $95.3 million in Medicaid Managed Care Organization rate increases.
* $38 million in Essential Community Provider Trust Fund Grants.
* $139.6 million in Commonwealth Care premium assistance payments for the purchases of private insurance by low-income individuals.
* $35.0 million administration and start-up expenses related to the legislation.
* $25.0 million in funding for health access and advancement programs within the Department of Public Health and the Massachusetts Technology Park Corporation.
The Commonwealth generally expects to receive federal financial participation in an amount equal to one-half of these expenditures, excluding essential community provider grants. In addition, the Commonwealth expects to be able to benefit from $191.1 million of federal participation in costs that have previously not qualified for federal funds.
After fiscal 2007, Commonwealth Care premium assistance payments will be funded by partially redeploying existing funds previously used to reimburse hospitals for free care. As more individuals access health insurance through the Connector and take advantage of premium assistance, it is expected that spending on free care through the new Health Safety Net Trust Fund, which replaces the Uncompensated Care Trust Fund in fiscal 2008, will decline.
The legislation also requires the Uncompensated Care Pool to make $70 million of payments to certain hospitals that were previously funded through a different mechanism, which will also be eligible for 50% matching by the federal government.
The following table shows the incremental cost from fiscal 2006 to fiscal 2007 only in the components of the Massachusetts health care financing system changed by the healthcare reform legislation. Fiscal 2007 costs and revenues include the change directly driven by the legislaiton and in some cases also include inflation that would have occurred in the absence of the health care reform legislaiton. Other costs attributable to the existing MassHealth program but not directly affected by the legislation are not included for either fiscal 2006 or fiscal 2007. The projected costs of heatlh care reform for fiscal 2007 have changed minimally since the November 10, 2006 Commonwealth Information Statement Supplement. Individual spending and revenue components as presented below have been updated to reflect accounting changes associated with the Uncompensated Care Pool.
Health Care Reform Spending and Revenue (in millions)
Spending 2006 2007 Change MassHealth Expansion – 162.5 162.5 Acute Care Hospitals, Managed Care Organizations and CHCs 1,531.7 1,180.7 (351.0) HCR Start Up and Premium Assistance 116.1 293.7 177.6 Total Spending related to HCR Components 1,647.8 1,636.9 (10.9) Revenue MassHealth Expansion Incremental Revenue (1) – 81.2 81.2 Pool Revenue 555.6 526.7 (28.9) Other Waiver Revenue 671.0 763.5 92.5 Intergovernmental Transfer Revenue 423.5 – (423.5) Total Revenue related to HCR Components 1,650.1 1,371.4 (278.6) Net Cost of HCR Components (2.2) 265.5 $267.5
Source: Executive Office of Administration and Finance
(1) includes revenue generated from $95.3 million in Managed Care Organization rate increases.
The health care reform legislation is also expected to result in a reduction in tax revenues starting in fiscal 2007, due to increased pre-tax spending on health insurance premiums by employees and businesses in the Commonwealth. The Depatment of Revenue estimates that the impact of the health care reform legislaiton on fiscal 2007 tax revenue collections will be minimal. The Department is curetnalyt awaiting information from the Connector to determine the fiscal 2008 revenue impact of the legislation. The October 24, 2006 fiscal 2008 tax revenue estimated issued by the Secretary of Administration and Finance includes a downward adjustment of $40 million to account for any potential impact of the legislation.
Not to be picky…but…this is the best information anywhere — perhaps the only information — on the financing of MA health reform. How come we have to worm our way into Wall Street bond documents to find it? We know — picky picky.
Anyway, do you see anything in here surprising, revealing, disturbing, pleasing? Share your insights with us, in public or private. We love ‘em.