BOSTON — Lawmakers are seeking more support for the state’s safety net hospitals amid rising concerns about the fiscal health of a fund that helps cover medical costs for large numbers of uninsured and low-income patients.
Hospitals and health insurers pay into the so-called safety net fund – a pool of money that helps fund care for hundreds of thousands of low-income residents who are uninsured or underinsured – with the state chipping in additional funding. But if the fund runs low, hospitals are on the hook for the shortfall.
The fund is projected to have a shortfall of more than $220 million in the upcoming fiscal year, hospitals say, rising to the highest level in nearly two decades.
Without additional funding, financially challenged hospitals will be forced to cover the deficit, leaving less money to provide medical care for low-income and uninsured patients, they say.
An amendment to the Senate’s version of the $57.9 billion state budget filed by Sen. Barry Finegold, D-Andover, would require commercial health insurance companies to cover 50% of any revenue shortfalls in the safety net fund.
“We need to do something to help our local hospitals,” Finegold said. “This is part of a long-term problem with funding for hospitals that serve the state’s most vulnerable residents. We need to fix it.”
Many earmarks
Finegold’s proposal is one of more than 1,000 amendments to the Senate’s budget, many of them local earmarks seeking to divert more state money to local governments, schools, cash-strapped community groups and nonprofits. Only a handful will likely make it into the Senate’s final spending package.
The plan faces pushback from the Massachusetts Association of Health Plans, which represents commercial insurers who would be impacted by the proposed changes to the hospital safety net program.
Lora Pellegrini, the group’s president and CEO, said requiring insurers to cover the fund’s shortfalls would jeopardize negotiations between the state Department of Health and Human Services and the U.S. Centers for Medicare and Medicaid Services that seek to reduce assessments paid by medical insurance carriers.
“This really came out of nowhere, and would be counterproductive to those efforts,” she said. “We have a committee process for a reason and that’s where these kinds of special interest issues should be vetted, not in the budget.”
But the move is backed by the Massachusetts Health and Hospital Association, which says requiring insurers to cover the shortfall would help alleviate an “unmanageable financial burden” on the health care system “by broadening funding support for the program.”
“The Health Safety Net is a vital component of Massachusetts’ healthcare infrastructure and its ability to cover the costs of care for low-income and uninsured patients,” Daniel McHale, MHP’s vice president for Healthcare Finance & Policy, said in a statement.
“At this increasingly fragile time for the entire health care system, it is imperative that we take the steps needed to stabilize the safety net for the people and providers who rely on it each day.”
Local hospitals affected
The state’s safety net hospitals and community health centers – which include Lawrence Hospital, Salem Hospital, Holy Family Hospital in Methuen and Anna Jaques Hospital in Newburyport – serve a disproportionate percentage of low-income patients.
Many are heavily dependent on Medicaid reimbursements, which are typically less than commercial insurance payouts.
Nearly 30% of Lawrence General’s gross revenue is for care provided to Medicaid, or MassHealth, patients. The state average is 18%.
Many community hospitals are collecting from low-paying government insurance programs, and getting below-average reimbursements from commercial insurers, advocates say.
Lawmakers also swept money from the hospital safety net fund to help cover the costs of new Medicare savings programs that pay some or all of eligible senior citizen’s premiums and other health care costs, including prescriptions.
Hospitals are also seeing increased demand from uninsured patients as hundreds of thousands of Medicaid recipients see their state-sponsored health care coverage dropped following the end of federal pandemic-related programs, which is driving up costs. Claims processing problems are another factor adding to hospital costs, they say.
Those and other factors have widened the fund’s shortfall from $68 million in fiscal 2022 to more than $210 million in the previous fiscal year, according to the hospital association. Combined, the shortfall could reach $600 million for the three fiscal years, the association said.
Biggest expense
The House, which approved its $58.2 billion version of the state budget two weeks ago, proposed $17.3 million in state funding for the hospital safety net fund. The Senate, which begins debate on its version of the budget next week, has proposed a similar amount.
In the current budget, the state allocated $91.4 million for the safety net fund.
But the House budget didn’t include an amendment requiring insurers to help hospitals pay the shortfall. That means even if the Senate approves Finegold’s amendment, it would still need to be negotiated as part of the final budget before landing on Gov. Maura Healey’s desk for consideration.
Health care coverage, in the meantime, is one of the state’s biggest expenses. Medicaid costs have doubled in the past decade and now account for nearly 40% of state spending.
MassHealth serves more than 2 million people – roughly one-third of the state’s population – despite federal Medicaid redeterminations that have reduced its rolls over the past year.