Governor Charlie Baker’s proposed state budget keeps spending growth in the state’s Medicaid program, a lifeline for low-income residents who need medical care, to 5 percent a year.
That increase would be modest compared to the double-digit jumps in recent years. But the program, known as MassHealth, would still account for $15.4 billion — the single biggest chunk of the state budget — to provide insurance to more than one-fourth of the state’s residents.
It accounts for nearly 40 percent of the $39.6 billion state budget
The program’s massive costs and rapid growth force state officials to make difficult choices, given the governor’s stated goal not to raise taxes. So, every dollar spent on health care for the poor is a dollar not spent on education, transportation, or other programs.
The cost of MassHealth has risen for some of the same reasons that health care spending in general has increased, including the rising price of prescription drugs and medical services. Still, analysts said, spending on the program has far outpaced the increase in overall medical spending because of swelling rolls.
MassHealth added about 420,000 members in the last two years, largely because the federal Affordable Care Act expanded eligibility, according to the Blue Cross Blue Shield of Massachusetts Foundation, a research arm of the Blue Cross insurance company. Enrollment ballooned in 2014 after the state’s Health Connector website failed and officials put 300,000 people in MassHealth temporarily, regardless of their income, as they sorted out the Connector problems.
The program insures nearly 1.9 million of Massachusetts’ 6.8 million residents. That includes many people living in poverty, who, partly because of their difficult circumstances, may have more complex health issues that require expensive care — everything from diabetes and heart disease to drug addiction, depression, and other conditions.
MassHealth also covers more benefits, such as certain home care and mental health services, than the typical commercial health plan, said Audrey Shelto, president of the Blue Cross foundation.
“It’s a big budget item,” she said, “but there are many reasons that it’s so big, given the breadth of the population it covers, the complexity of the population it covers, and it’s a benefit package that is bigger than what most people think about when they think of coverage.”
The Baker administration’s budget proposal, unveiled Wednesday, puts restrictions on some of those benefits. It would require prior authorization for home health services, a piece of the MassHealth budget that jumped by $170 million, or 41 percent, last year, said Health and Human Services Secretary Marylou Sudders.
The administration is taking several other steps to rein in costs, including holding flat most of the rates paid to providers and moving more MassHealth members into managed care plans, in which the state pays insurance companies set budgets to coordinate the care of patients.
State officials are also working to improve the process of identifying and removing members who do not meet the income eligibility requirements for the program, Sudders said.
MassHealth spending grew at a double-digit pace for two years before moderating to about 8 percent in the current budget.
Baker is proposing a 5 percent, or $726 million increase, in the budget for the next fiscal year, which begins July 1.
But as health care costs continue to rise across the nation, they will continue to challenge the MassHealth budget, analysts said. Prescription drug spending, for example, jumped 13 percent in Massachusetts in 2014, according to state reports.
“The big picture is that health care costs have been rising rapidly across the country for a very long time, and state programs that provide health care are affected very significantly by the overall costs,” said Noah Berger, president of the Massachusetts Budget and Policy Center, a research organization. “That’s having an effect on the state’s bottom line.”
Berger noted that the federal government reimburses about half of MassHealth spending, because it is a joint state-federal program, softening the blow on state coffers.
But Joshua Archambault, senior health care policy fellow at the Pioneer Institute, another think tank, said the state should curb MassHealth spending by stepping up efforts to weed out people receiving benefits for which they are not eligible.
“[Almost] 30 percent of our state’s population is on a safety net program,” he said. “That’s remarkable.”