Massachusetts health insurance program going broke already

Surprise! Those marvellous "projections" were too optimistic. But it's a "success", of course

Enrollment in the state's new subsidized health plan is growing so quickly that the state could face a funding gap as large as $147 million by the end of the fiscal year, according to a state projection. An aggressive outreach campaign by the state, hospitals, community groups, and advocates, including an extensive push in the last few weeks, has put enrollment on a path that could reach nearly 180,000 by June 30. Even if signups slow, the program will probably still be over budget - a victim of its own success - because the state has already enrolled nearly as many people as expected for the fiscal year. "It's a good problem to have - people are getting insured and hopefully getting care," said state Senator Richard T. Moore, cochairman of the Legislature's Health Care Financing Committee. "But any shortfall is a big deal."

Budget officials cautioned that the projections could be too high, since there is little history on which to base them. The subsidized program is part of the state's unprecedented initiative requiring nearly all residents to have health insurance. Even if the gap reaches $147 million, there is no indication it would cripple healthcare reform. But the state would have to find ways to pay the insurance bills for so many more people. Options include appropriating more money, using funds allocated to care for those without insurance, or cutting extra payments to certain hospitals that were included in the law mandating insurance.

The state's budget chief, who also oversees the subsidized insurance program, indicated that the state is not considering a cap on enrollment. "It's too early to make any departure from the health reform plan," said Leslie Kirwan, secretary of administration and finance and chairwoman of the Commonwealth Health Insurance Connector. "We will follow the trends and adjust, if needed."

Financial pressures will grow for fiscal 2009, which begins July 1, since insurers who participate in the subsidized program are expected to ask for significantly higher payments from the state. In addition, there is uncertainty about how much the federal government will contribute toward the total cost.

The new enrollment and budget projection, obtained by the Globe last week, was prepared by the connector's chief financial officer, Patrick Holland, to alert board members to a potential problem. The state budgeted $472 million this fiscal year for the subsidized program, based on enrollment estimates made last winter. The program, called Commonwealth Care, provides comprehensive insurance to people without access to work-based coverage who earn less than 300 percent of the federal poverty level, or about $31,000 for an individual. The state money pays the full premium for the lowest-income residents and subsidizes the rest. Members are responsible for small copayments.

The connector began enrolling people in October 2006 and set a goal of 136,000 by June 30, 2008. Outreach has resulted in more than 133,000 people signing up. If enrollment reaches the high estimate of 178,280 by June 30, Holland said, the state cost could hit $619 million. Also driving up the cost was a decision by the connector last winter to eliminate premiums for thousands more people than originally planned, in an effort to make insurance more affordable.

The enrollment boom "is a sign of success, not failure," said John McDonough, executive director of the advocacy group Health Care for All. "The sky is not falling. There's a budget challenge." McDonough also said the higher enrollment suggests that there are more uninsured people in Massachusetts than state surveys showed.

Commonwealth Care is one part of the state's effort to cover the uninsured. Massachusetts has also signed up 55,000 additional adults and children for Medicaid and expanded options for private, unsubsidized insurance. All residents must have insurance by Dec. 31, if the state deems it affordable, or pay a penalty.

Holland noted one positive financial sign for Commonwealth Care: The average monthly medical costs incurred by newly insured members is lower than expected. The state has some flexibility built into its $27 billion budget to help fill the likely gap. Kirwan can shift money from the $448 million Health Care Safety Net Trust Fund, which pays for care at hospitals and health centers for uninsured patients.

Long-term funding of healthcare reform depends, in part, on shifting more and more of those funds to insurance subsidies over the next few years. However, this year's state budget includes significantly less money than last year's for the safety net, and spending in that account last year did not go down as much as some had expected, according to preliminary figures.

Hospital officials are concerned about getting stuck with unpaid bills. "There needs to be adequate funding for the safety net," said Joe Kirkpatrick, vice president of the Massachusetts Hospital Association. Money might also be taken from funds set aside for two hospitals that serve a large number of uninsured patients, according to discussions at a connector board retreat last month.

Boston Medical Center and Cambridge Health Alliance negotiated a special deal in the health reform law that guaranteed them $287 million a year through 2009 in fees and increased Medicaid rates. "That's probably on the table," said Moore.

In addition, he said, the state needs to work harder to reduce healthcare costs. The Legislature could also appropriate more money in a supplemental budget. Kirwan would not discuss possible funding options, saying it was too early in the year to determine if the shortfall would occur. One specialist in healthcare financing said the potential shortfall should not be minimized. "This is one of many warning signs, especially in tandem with the projected state budget deficit and the skyrocketing cost of healthcare in the state," said Alan Sager, professor of health policy and management at the Boston University School of Public Health. "The [healthcare] law is very shaky on the revenue side."

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