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Why is the state restructuring MassHealth?

For more than a year, top health officials in Governor Charlie Baker’s administration have been working on plans to make big changes to the state’s biggest public program: MassHealth.

This is the state’s Medicaid program, providing health coverage to more than 1.8 million people living on low or no income. That’s about 1 in 4 Massachusetts residents.

MassHealth already accounts for 40 percent of all state spending, and administration officials say its costs will balloon out of control unless the program goes through a major restructuring.

The changes could have big implications for the health care industry and the many people who receive coverage under the taxpayer-funded program. Here are some questions raised by the state’s plans.


What changes is the state proposing?

The state wants to shift how MassHealth pays doctors and hospitals to what are known as accountable care models.

Most health care providers today are paid under a system known as fee-for-service. This compensates doctors and hospitals for every test, service, and procedure. It doesn’t give them incentives to coordinate patient care or to work efficiently to cut waste.

Many health care experts say a better model is accountable care, also called alternative payments or value-based payments. Under this system, health care providers are rewarded for sticking to a budget and meeting certain quality scores. The goal is to avoid costly hospital visits whenever possible by better managing patient care.

Care can be managed in a variety of ways, including through telemedicine and home visits. Accountable care models allow health care providers to spend money on things not covered under the traditional fee-for-service system, such as hiring case managers and community health workers, and helping patients get transportation to medical appointments.

Why is the state doing this?

MassHealth is the biggest piece of the state budget, and state officials say its costs are rising too quickly. They say they have two options: restructure the program, or cut benefits. The administration hopes that restructuring will slow the program’s spending growth, though they won’t say exactly how much they hope to save.


The state is on track to spend at least $14.7 billion on MassHealth this fiscal year, and more than $15 billion next fiscal year, which begins July 1.

Why does this matter?

Accountable care organizations work best when patients receive care under a network of health care providers who communicate with each other, instead of letting patients go anywhere they want. That means many MassHealth members may find themselves in narrower networks, which make it difficult for them to see certain specialists. This could disrupt care for many families.

Changes to the program will also affect the state’s big health care industry. Insurance companies, physician groups, hospitals, and other health care organizations will have to adapt to the new payment models. For many health care providers, this means building up care teams and data-crunching technology to better track and coordinate patient care.

Has this been done before?

Yes. State and federal laws, including the Affordable Care Act, or Obamacare, are pushing the health care industry to move to new payment models. Medicare, the federal insurance program for seniors, is already testing accountable care organizations, including several in Massachusetts. Commercial insurance companies, led by Blue Cross Blue Shield of Massachusetts, are also expanding these kinds of payment models.

Does accountable care actually work?

Studies suggest that these models can help slow the growth of health spending while improving the quality of care. But it’s unclear whether accountable care will make a big dent in spending.


One study from the federal government found that one model, called Pioneer accountable care organizations, saved Medicare $304 million nationwide over three years. But that is a small fraction of the more than $1 trillion Medicare spent during the same period.

In a study of another group of accountable care organizations, researchers at Harvard Medical School found a savings of about 1 percent in some cases, and no measurable savings in others.

When do the changes take effect?

State officials plan to begin the new payment systems in October 2017. But first they need the approval of the federal government, which funds about half the costs of MassHealth. They plan to apply for five years of federal funding, including $1.5 billion in new funds to help the state transition to accountable care.

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.