At a time when many states are facing substantial cuts in federal financing, Massachusetts will be able to expand its first-in-the-nation healthcare law because of a federal promise of $10.6 billion over the next three years, Governor Deval Patrick said yesterday.
The deal, struck after months of delicate negotiations, gives Massachusetts about $2.1 billion more than it received from the government in its last round of negotiations three years ago for its Medicaid waiver package. The waiver allows Massachusetts to provide subsidized health insurance to some residents with incomes higher than would typically be allowed under traditional Medicaid rules.
While Massachusetts did not get everything it had requested, it did get all of the money it expected to receive for this fiscal year, Patrick said, easing anxiety among state leaders who are grappling with a budget shortfall.
"The American economy is in turmoil and the future is uncertain," Patrick said. "Thanks to this agreement, we can keep our healthcare commitments."
Patrick said the agreement also gives the state flexibility, allowing it to spend $5 billion over the next three years, about $1 billion more than previously allowed, on its newly created programs. The state had lobbied to get the spending cap lifted altogether.
Dr. JudyAnn Bigby, state secretary of health and human services, acknowledged that federal authorities turned down some requests by Massachusetts but declined to specify what was denied, saying only that they were not "significant" items.
Although the amount granted the state was $2 billion less than requested in December, it was seen as sufficient, especially given that expected health insurance enrollment has lagged in recent months.
Several state leaders characterized the agreement as a federal stamp of approval for Massachusetts' historic healthcare law, which was enacted in 2006 and requires nearly every resident to have coverage.
"This is a signal from the federal government that they support what we are trying to achieve here," said state Senate President Therese Murray.
Yesterday's agreement is unusual. It comes at a time when many states are fighting with federal officials for the right to extend subsidized health insurance to people with incomes higher than is traditionally allowed under Medicaid rules.
Massachusetts was granted permission in its 2006 law to provide subsidized coverage to individuals making up to 300 percent of the federal poverty level, or roughly $31,000 for a single person and $63,600 for a family of four.
That has meant thousands more residents are eligible for health coverage that is at least partially subsidized by the government. Federal authorities agreed to continue that provision in the state's waiver package.
Senator Edward M. Kennedy, who played a pivotal role in behind-the-scenes negotiations, said the agreement allows the state to continue blazing a path for healthcare reform.
"We've made major progress in the program's first two years, cutting the number of uninsured in half and increasing employer-sponsored coverage," he said in a written statement. "Our experience with health reform in the Commonwealth argues well for our debate on national health reform next year."
Since the state launched its healthcare law two years ago, nearly 440,000 more residents have obtained coverage, with about half enrolling in their employer-sponsored programs. Several months ago, state officials said they faced at least a $130 million gap this fiscal year in paying for the newly insured, and they required hospitals and insurance companies to contribute more to the fund. The state also boosted premiums and copayments for consumers who receive subsidized coverage.
At the time, the Patrick administration also said it would require employers to pay more toward their workers' coverage under complex new rules that were to start today. But yesterday the administration, facing an uproar from businesses, said it would delay the rules until Jan. 1 and exempt many small companies from the proposed changes. Several business leaders had warned that the rules would force many companies, already reeling from the soured economy, to drop health coverage all together.
Bigby, the state's human services director, said in an interview that the concerns raised by businesses were "compelling" and that the state's intent was not to "penalize small businesses."
To soften the impact, state officials said yesterday, they would not only delay the new rules but apply them only to businesses with 50 or more full-time or equivalent workers - rather than businesses with 10 or more such workers, as was originally planned. Under the new rules, the larger companies would have to pay 33 percent of their workers' premiums within 90 days of hiring and make sure that at least 25 percent of their workers are covered by the plan. Otherwise, the employer must pay a $295 fine per worker.
Businesses with fewer employees would still be allowed to follow the old rules, Bigby said, and meet only one of the two requirements to escape the penalty.
Kay Lazar can be reached at email@example.com.