Massachusetts will be responsible for at least $162 million in new costs over the next decade to fund the federal expansion of health insurance coverage, according to a new report.
The paper from the Pioneer Institute, a free-market-oriented Boston think tank, said that additional spending will squeeze the state budget and divert money from other priorities such as education and transportation.
The costs come in the form of a fee that is part of the Affordable Care Act, which extended insurance coverage to millions of people. The law makes more Americans eligible for Medicaid and provides subsidies to many people on private insurance plans, depending on their level of income. Pioneer said it is the first organization to calculate the long-term costs of the fee.
Massachusetts will lay out at least $324 million over a decade, but half of that will be reimbursed by the federal government, Pioneer said. The fee will come out of the state’s Medicaid program, called MassHealth, which is funded by taxpayers and already costs more than $15 billion annually.
“Health care is sucking up all of the money,” said Joshua Archambault, senior fellow at Pioneer.
Insurers are also paying fees to fund federal health care coverage, which for many companies amounts to tens of millions of dollars a year. The fees for both insurers and the state will be suspended for a year in 2017, giving them a break from the costs.
“Ultimately, these added costs exacerbate the costs that the state, [insurers], and the health care system as a whole are struggling with,” said Eric Linzer, senior vice president at the Massachusetts Association of Health Plans, which represents insurers.
The Baker administration is planning a series of changes to rein in costs in the MassHealth program, which provides insurance to more than one in four state residents.
“We are focused on restructuring MassHealth in a way that both improves the quality and coordination of care and creates a more fiscally sustainable program for the Commonwealth,” MassHealth spokeswoman Michelle Hillman said in a statement.