When Massachusetts implemented near-universal health insurance coverage in 2006, state policy makers knew some people would fall through the cracks. Despite the mandate requiring everyone to have insurance, a small number of residents would continue to show up at hospitals and community health centers without insurance or the ability to pay out of pocket for the care they need.
Those people are not turned away. But the system created in 2006 to reimburse providers for that free care is in need of an update.
Back then, the state developed an innovative way for hospitals and insurers to pool the cost of charity care so that a handful of safety net hospitals, like Boston Medical Center, didn’t have to bear the financial burden of caring for any remaining uninsured patients by themselves.
The solution was for all hospitals and insurers to pay an annual fee into a Health Safety Net fund, which reimburses a portion of the free care provided by community health centers and hospitals.
The good news is the program worked as intended, partially compensating health care providers for treating patients who lack insurance or have insufficient insurance, a population that is overwhelmingly low income. The bad news is the program no longer has anywhere near enough money to cover the care hospitals provide.
In fiscal 2023, the program reported a $107 million shortfall, up from $68 million the prior year. For fiscal 2024, which ended last June, state officials told the Massachusetts Health and Hospital Association they anticipate a $197 million shortfall. The association estimates the fiscal 2025 shortfall could be $230 million. When there’s a shortfall, the state prioritizes paying community health centers, then hospitals with a disproportionate share of patients with public insurance, then other hospitals. The bigger the shortfall, the more care goes uncompensated.
To be sure, hospitals receive public benefits like tax breaks in exchange for providing their communities with charitable care. And many hospitals remain profitable. But hospitals have struggled recently with staff shortages and rising demand. In the latest state data, for the quarter ending June 2024, more than half the state’s hospitals spent more money than they took in. A lack of adequate compensation for charitable care adds to those pressures.
The shortfall raises an important question: Are more people uninsured or underinsured today, and what can be done about it? It also suggests that after 19 years, Health Safety Net funding needs updating.
A MassHealth spokesperson said MassHealth lacks data to support the idea that the uninsured rate is causing the shortfall. The latest official data, from 2023, say only around 2 percent of state residents are uninsured.
Anecdotally, though, experts suggest this number may be increasing. Dr. Eric Dickson, president and CEO of UMass Memorial Health, said his hospitals see many newly arrived immigrants who don’t have insurance or have public insurance that only covers emergency care. New arrivals may be ineligible for insurance due to immigration status or may not know what they are eligible for.
Peter Banko, president and CEO of Baystate Health, said that system has seen a sixfold increase over seven years in unpaid debt from people who are employed but low-income. These people may have high-deductible health plans and can’t afford the deductible and may delay care until a medical situation worsens.
The state also recently reviewed eligibility for all MassHealth enrollees. Hannah Frigand, who oversees Health Care for All’s consumer helpline, said some people who were deemed ineligible for MassHealth have not reenrolled elsewhere. Some may be eligible for employer-sponsored insurance but didn’t take it because it was too expensive or they missed open enrollment.
One important step to reducing the shortfall is ensuring everyone who is insurance-eligible is enrolled.
Another issue is simply the growing cost of care. Every year, hospitals cumulatively pay $165 million into the Health Safety Net; insurers pay another $165 million; and state government last year paid $16 million. The problem is the amounts were set in law when the Health Safety Net was created, without accounting for inflation. Then, the assumption was the need for the pool would lessen as more people obtained insurance. Instead, people have continued to be uninsured and underinsured, and costs of care have climbed.
Since the COVID-19 pandemic, there has been growing demand for care, combined with increasing costs for health care and prescription drugs. The Health Safety Net reimburses hospitals based on Medicare rates, so as those rates rise with inflation, applications for reimbursement rise.
According to the Health Safety Net’s 2023 annual report, all but six hospitals got some uncompensated care money. The most went to Boston Medical Center ($104.5 million), followed by UMass Memorial Medical Center ($23.6 million) and Massachusetts General Hospital ($16.8 million).
A MassHealth spokesperson said the Health Safety Net “is reviewing its policies to better support providers who serve uninsured or underinsured patients.” There is likely room to revise the distribution formula to better prioritize hospitals that care for the lowest income patients, while also revising the funding formula to account for inflation.
Anyone who presents at a hospital can and should get care. Finding the fairest way to pay for that care remains a work in progress.
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