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Amendment incites Medicaid fight

Budget rider stirs battle on Beacon Hill

A proposal aimed at promoting new ways to pay for the health care of low-income patients has spurred a fierce political fight between insurers, consumer advocates, and one of the state’s largest hospital systems.

At issue is whether the proposal, tucked into the House version of the state budget, would allow hospitals and health systems to essentially act as insurers in managing the care of patients covered by Medicaid, the government health program for the poor.

Steward Health Care System LLC, which lobbied for the budget amendment, said the proposal would simply allow hospitals to adopt the so-called accountable care model for Medicaid patients — the same model of carefully managed care that has led to savings for commercial health plans and Medicare, the government insurance program for seniors.


But consumer advocates and insurers say the language of the amendment goes beyond that. They say it would permit Steward and other health systems to take on risk the way insurance companies do, without following the same regulations and meeting the same requirements, such as setting aside sufficient cash reserves to cover losses.

That increases the danger of the hospitals becoming insolvent, which would ultimately hurt consumers, opponents of the amendment say.

“The language allowing them to go around the Division of Insurance is troubling,” said Amy Whitcomb Slemmer, executive director of the consumer advocacy group Health Care for All. “The biggest concerns are the myriad number of unknowns that have a potential immediate impact on patients.”

The amendment was included in the $38 billion state budget that House lawmakers approved last month. The Senate on Friday approved a budget without the amendment. It is one of many issues that lawmakers will have to reconcile before completing a final budget and sending it to the governor’s desk.

The amendment would create a pilot program to extend accountable care to Medicaid. This model pays doctors and hospitals set amounts to care for patients, giving them incentives to contain costs while improving the quality of care. It is a change from the traditional method of paying for medicine, in which doctors collect fees for every appointment, service, and procedure.


Accountable care models are available to people with commercial health insurance, as well as to some seniors on Medicare. But they have not been extended to the low-income people on Medicaid.

Steward, the for-profit hospital chain, says it has saved millions of dollars and improved the care of patients through its accountable care program for Medicare patients and wants to bring the program to Medicaid patients.

“All we’re saying is, let’s have Medicaid adopt the same successful model,” said David Morales, chief strategy officer at Steward. “This is not about any provider trying to be like an [insurer].”

But Lora M. Pellegrini, chief executive of the Massachusetts Association of Health Plans, which represents the health insurance industry, said the measure Steward is backing would allow the company to do much more than run a pilot program.

“We think the amendment is a backdoor way for them to become an insurer without any of the obligations insurers are required to have,” she said. “We’re not trying to stop an [accountable care] pilot, but we think they’re trying to become an insurer.”

Morales said those concerns are unfounded and that the insurers’ opposition shows they are simply trying to protect their profits.


Steward, which owns nine hospitals, including St. Elizabeth’s Medical Center in Boston, is the only large health system actively pushing the measure. The Massachusetts Hospital Association, which does not include Steward as a member, has not taken a position.

A business group, the Retailers Association of Massachusetts, and a labor union, the Service Employees International Union Local 1199, are also backing the amendment. Jon B. Hurst , president of the retailers association, said the state must take steps to contain rising Medicaid costs, which business and individual taxpayers bear.

“Real reforms in Medicaid are long overdue,” Hurst said. “There’s been a lot of discussion, but nothing has happened. Pilots can be a great way to move the needle.”

The state Division of Insurance and the Executive Office of Health and Human Services, which oversees the state’s Medicaid program, declined to comment. The state’s Medicaid office is already in the process of developing alternative payment models.

Priyanka Dayal McCluskey can be reached at Follow her on Twitter @priyanka_dayal.