As they prepared to roll out COVID-19 vaccines across Massachusetts, the Baker administration in December made a little-noticed decision about how much it would pay hospitals, health centers, pharmacies, and other providers for putting shots in arms of people covered by the state’s Medicaid program.
The administration initially said that program, MassHealth, would pay about $45 per vaccination, equal to the national Medicare rate for providers set by the federal government.
But a month later, Governor Charlie Baker’s administration sweetened the pot, agreeing to pay providers twice the national Medicare rate. And it required private health plans to pay at least that amount.
This means providers get a fee of at least $90 for giving two doses of the Pfizer-BioNTech or Moderna vaccines to anyone covered by MassHealth or private insurance. The administration has not set rates for the one-shot Johnson & Johnson vaccine.
Administration officials said they increased the payments to encourage swift vaccination of millions of residents. But the move came as a surprise — a pleasant one for hospitals that wanted the higher rates, and less so for insurers that must pay the additional costs.
At this point, insurers aren’t objecting loudly, but the decision is stirring concerns about how vaccinations will affect future health care costs.
“It’s an emergency; it’s a good thing to get shots into people’s arms as quickly as possible,” said Jon B. Hurst, president of the Retailers Association of Massachusetts and a frequent critic of high medical costs.
“My major concern was: That’s a lot of money,” Hurst said. “Who’s going to pay for it? Is it going to increase premiums, particularly for small businesses?”
Consumers don’t pay anything out of pocket to get vaccinated against COVID-19. Insurers pay providers for administering the shots, and the federal government is paying for the cost of the vaccines themselves.
While the $90 fee per vaccination may be a relatively small price to prevent a devastating illness that is causing hospitalizations and deaths, the Massachusetts rate stands out.
The Medicaid programs in neighboring New Hampshire and Connecticut, for example, are paying about $45 for each vaccination.
In fact, the vast majority of state Medicaid programs are paying the $45 rate, said Matt Salo, executive director of the National Association of Medicaid Directors. Some are paying more, but Massachusetts appears to be the only state paying as much as double that rate, he said.
Medicare is a federal program that provides health coverage for seniors, while Medicaid, which covers low-income individuals, is run by states that can set their own payment rates.
Massachusetts is also unusual in setting the roughly $90 payment rate not just for its Medicaid program — $33.88 for the first shot and $56.78 for the second — but for requiring as much from private health plans, which typically negotiate prices directly with health care providers.
Baker administration officials set the rates through the emergency powers they’ve used to govern during the pandemic.
“The Commonwealth is engaged in the biggest vaccination effort in recent history, and the administration is taking immediate and bold steps to prepare Massachusetts to vaccinate as many residents as possible in the most efficient and equitable manner,” said Brooke Karanovich, a spokeswoman for the Executive Office of Health and Human Services.
“Reimbursement rates to providers should not be a barrier,” she said.
Around the time the administration set the initial rates in December, certain hospital leaders argued the payments were too low. They noted the time and effort involved in servicing vulnerable and hard-to-reach communities, where patients cannot drive to a mass vaccination site. That includes the work of determining who is eligible for shots, contacting them, and scheduling their appointments. For patients who don’t speak English, they also hire interpreters to help with paperwork.
Staff and volunteers from UMass Memorial Health Care, for example, are going to homes and churches to vaccinate people, focusing on people of color and those who are homebound.
Dr. Eric Dickson, chief executive of UMass Memorial, said he explained the challenges during a call with the governor. Hospital leaders have talked to Baker and Marylou Sudders, the state secretary of health and human services, frequently throughout the pandemic.
“I was one of the more vocal people on the call with the governor [saying] that this is just not enough for us to sustain these programs,” Dickson said. “We asked the governor for an increase in reimbursement, and he’s delivered.”
State officials temporarily stopped sending new doses of COVID vaccine to hospitals last month but later restored hospitals’ supplies.
Steve Walsh, president of the Massachusetts Health & Hospital Association, said hospitals have established more than 50 vaccination sites across the state — a costly endeavor — and many sites are in communities hardest hit by the coronavirus.
“This approach by hospitals is largely unique to Massachusetts,” Walsh said. “We fully support the vaccine administration rates set by the state, which will ensure these hospital vaccination initiatives are sustainable and accessible to residents for as long as possible.”
Massachusetts insurers expect to spend as much as $400 million on COVID vaccine fees this year, which, like other medical costs, they ultimately expect to build into insurance premiums.
Insurance companies may be vexed by the higher-than-usual payment rates in Massachusetts, but they are not fighting the administration’s decision, at least partly because vaccinating all residents is a universal goal.
“Ending the pandemic is our shared goal, and we want to ensure that our members are vaccinated as quickly and equitably as possible,” said Amy McHugh, spokeswoman for Blue Cross Blue Shield of Massachusetts. “Although the Massachusetts rates for administering COVID-19 vaccines may be high compared to other states, we will of course follow all state guidance in an effort to help get us closer to herd immunity.”
Blue Cross, the state’s largest insurer, expects to spend at least $150 million on vaccine administration this year.