The federal government on Friday approved a sweeping overhaul of the state’s health care program for poor and low-income residents, pushing medical providers to better coordinate the care of nearly 2 million people.
The goals are to improve the health and quality of care for a population of patients that tends to have complex medical needs, while also attempting to control spending in the $15 billion-plus Medicaid program — the single largest expense in the state budget.
The new agreement represents the biggest change to MassHealth in two decades. It will expand the number of hospitals receiving payments for serving large numbers of MassHealth patients, from seven to 15.
The federal approval comes with a massive infusion of funds to help hospitals and other providers shift their operations to a new business model, one that gives them a set amount of money to care for patients and scores them on quality to ensure they aren’t skimping.
Marylou Sudders, the Massachusetts secretary of health and human services, said the federal funding is crucial to making the new care model work.
“If you really want to change a system, you really need to have the right investments so that system can develop the services and structure that it needs,” she said in an interview.
The state’s Medicaid program, called MassHealth, has been rooted in the old fee-for-service model of medicine, in which doctors and hospitals are paid for every service they provide. The administration plans to shift MassHealth to an emerging model called accountable care, which aims to prevent serious medical problems and costly hospital visits by providing more coordinated care that helps members stay healthy.
For the one in four Massachusetts residents on MassHealth, state officials vow that the change will mean closer communication with primary care physicians or care managers, who will help coordinate different medical, mental health, and social services.
But in the near term, the changes also could cause confusion and disruption as consumers learn about the new care models and choose their doctors.
“It’s a really important step toward a MassHealth program that protects consumers’ health in the long term, but I think the big challenge is going to be putting the program into place,” said Matt Selig, executive director of Health Law Advocates, a nonprofit group representing low-income residents. “It’s a huge undertaking — it’s uncharted territory in Massachusetts — and it’s going to be hard.”
State and national health care laws have been pushing the health care industry to move to accountable care models. The private insurance market and Medicare, the government health program for seniors, already have begun adopting such models.
Putting MassHealth on the same path is one of the most significant achievements yet by Governor Charlie Baker, a former health insurance executive. The approval of the so-called Medicaid waiver authorizes $52.4 billion in spending over five years, including $29.2 billion from the federal government.
Without changes, Baker officials say, the growing costs of MassHealth are unsustainable; spending on the program has been rising at an 8 to 12 percent clip over the past few years and is consuming an increasing share of available state funds.
It’s unclear exactly how much money the administration is hoping to save by shifting to accountable care. Other such programs across the country have produced only modest savings so far, according to studies.
The challenges are evident in Massachusetts. A similar but smaller effort to better manage care for a group of poor and disabled residents has proved more complicated than expected, resulting in severe financial losses.
“This kind of reform takes time,” Sudders said.
The state was under a deadline to come up with a new MassHealth plan, as $1 billion in federal funding was scheduled to expire on June 30, 2017.
The new deal includes $4.8 billion in funding for hospitals that serve especially large numbers of MassHealth patients. There is also $1.8 billion in new grants to help health care providers shift to new accountable care models. Some of the money is contingent on Massachusetts meeting certain performance benchmarks set by federal officials.
In some cases, the deal may allow patients to receive additional services that are hard to access under the current system. In response to the ongoing opioid crisis, for example, MassHealth will expand residential rehab treatment for people with a substance abuse disorder, said Daniel Tsai, assistant secretary of MassHealth.
Currently, the program covers shorter-term detox treatment, but not longer-term residential programs.
Massachusetts is one of several states moving to adopt accountable care models for its poor and low-income population, following similar moves by Rhode Island and Vermont, according to federal officials.
“This is a very big deal,” said John E. McDonough, a professor at Harvard T. H. Chan School of Public Health. “This puts MassHealth on a transformation path from where it is today.”
Advocates said the planned changes could help improve care for patients by boosting communication and coordination among different entities — primary care doctors, hospitals, therapists, social service agencies — that serve the same person.
“All these different types of services that you used to get from a wide variety of organizations, it’s going to be in their interest . . . to make it much more coordinated and easier for you to access,” said Audrey Shelto, president of the Blue Cross Blue Shield of Massachusetts Foundation, a research and advocacy group. “They’re going to be held very accountable for making sure you have access to all those services.”
Many details of the new MassHealth plan have yet to be worked out. Six organizations that may include some of the state’s major medical providers are set to begin accountable care pilot programs as early as next month. Officials have not identified the organizations yet.
The new federal funding kicks in next July, and full implementation of the new care model is set to begin in December 2017.