GOP plan could erode Mass. health care law

The health care bill that squeaked through the US House of Representatives Thursday threatens to blow a hole in the Massachusetts budget and undermine the state’s near-universal access to insurance.

That was the assessment of elected officials, health care advocates, policy experts, and industry leaders after the House approved legislation to repeal and replace huge portions of former president Barack Obama’s Affordable Care Act.

The House plan could leave the state with a funding gap of as much as $2 billion a year, endangering coverage for about 500,000 people, according to Governor Charlie Baker’s administration. That would be a huge disruption for Massachusetts, the first state to mandate medical insurance coverage, more than a decade ago.

“Massachusetts leads the nation in health care coverage and I am disappointed by today’s vote as this bill would significantly reduce critical funds for the Commonwealth’s health care system,” Baker, a Republican who opposes his party’s plan, said in a statement.

Republican backers of the American Health Care Act, on the other hand, said it would remove costly government mandates and make insurance more affordable.

Not all in Massachusetts decried the vote. Bill Vernon, state director of the National Federation of Independent Business, said the GOP plan puts the country “on a path forward to more predictable and affordable health care for the backbone of our economy — America’s small businesses.”

The bill now heads to the Senate. Both chambers then would need to work out a compromise if a version passes the Senate.

■  What does the bill mean for Massachusetts’ budget?

The legislation seeks sweeping changes in many areas of health care, including Medicaid, the taxpayer-funded program for people with low or no incomes, and coverage for people with disabilities.

The Affordable Care Act (Obamacare) gave more people access to Medicaid and increased funding to cover that. The House bill would phase out that extra funding, and Massachusetts could lose $1.1 billion to $1.9 billion per year for its Medicaid program, called MassHealth.

The bill would also change the way the broader Medicaid program is funded. Currently, the government reimburses about half of whatever Massachusetts spends on Medicaid.

But House Republicans approved a per-person spending cap. That would mean less flexibility for the state and potentially another funding gap. For example, if there was a sudden epidemic or an expensive new drug on the market, the state would be on the hook for Medicaid spending that goes over budget — without extra help from the federal government.

“It does not account for any changes in what it costs to provide health care,” said Audrey Shelto, president of the Blue Cross Blue Shield of Massachusetts Foundation, which studies Medicaid.

The legislation would ax $880 billion from Medicaid spending nationwide.

“People need to understand how damaging this would be to [Medicaid in] Massachusetts,” said Brian Rosman, policy director at Health Care For All, a Boston advocacy group. “This bill would make deep, deep cuts to their health care.”

■  What about patients?

Medicaid covers 1.9 million people in Massachusetts, or more than 1 in 4 residents.

Low-income individuals and families have the most to lose. In addition to cutting Medicaid funding, the bill would slash subsidies that help many people buy private insurance. The Baker administration, as well as policy experts, say funding cuts could threaten half a million people in Massachusetts: about 300,000 who became newly eligible for Medicaid under Obamacare and 200,000 who rely on government subsidies to afford the plans they buy on the state insurance exchange, called the Health Connector.

The Congressional Budget Office studied an earlier version of the House bill and projected it would cause 24 million people to lose insurance. The precise impact of the latest bill is unknown because the CBO has yet to release estimates.

House Republicans “have pushed this bill through . . . without knowing how many people it’s going to be covering or how much it costs,” said Shelto. “For some people, these are life-and-death decisions.”

Big changes in Medicaid and subsidized coverage aren’t expected right away. The measures would begin in 2020.

■  Why is federal funding so important?

Massachusetts is often considered a leader for passing its health care law, under then-governor Mitt Romney in 2006. Among other things, the state mandated that everyone obtain health coverage. But the state law and Obamacare are hugely reliant on federal funding.

“We have a commitment to covering people that is largely financed by the federal government,” said Jonathan Gruber, an economist at MIT who was a consultant in the drafting of Obamacare.

That’s problematic because the state budget is already precarious.

Revenues in recent months have been coming in below expectations, while Medicaid remains a large and growing chunk of state spending. It has doubled over the past decade and now represents 40 percent of the $39 billion the state will spend this fiscal year.

The costs have grown so much the Baker administration has proposed a new fee on employers.

Without federal money, Massachusetts would face difficult options for Medicaid: Cut benefits, cut people from the program, raise more revenue from taxes and fees, or take money from areas like education and transportation.

“The state will have to figure out how to live with a much smaller amount of money,” Rosman said. “Either you can stop covering certain people and leave people high and dry, or you can reduce benefits. There’s no magic formula.”

But Joshua Archambault, senior fellow at the Pioneer Institute, a free market-oriented think tank in Boston, said the state is too reliant on federal funds. “Instead of focusing on health care value and quality, we’re focused on federal dollars,” he said. He hopes for a debate about innovation that could “create value” in the complex health care system.

■  What about the state’s health care industry?

It’s a big part of the Massachusetts economy, and hospitals and insurers are following the congressional action closely.

Hospitals depend on federal Medicaid funding, especially as enrollment in the program grows. Medicaid cuts could threaten the finances of hospitals that serve many poor and disabled patients.

“This is a big deal for us,” said Kate Walsh, CEO of Boston Medical Center, where half the patients are covered by Medicaid. “It is a big concern.”

Many hospital executives say they lose money or barely break even because Medicaid rates aren’t enough to cover the full costs of providing care.

The House bill would make that worse, the Massachusetts Health and Hospital Association says. Its “restrictive per capita financing scheme will result in significant funding implications for health coverage for thousands of Massachusetts low-income individuals and the providers that care for them,” president Lynn Nicholas said.

Insurers, too, would be affected. Tufts Health Plan is worried about a shortfall in Medicaid funding because the insurer relies on some of those dollars to manage care for 234,000 people covered by Medicaid. Tufts also sells plans on the state Health Connector. But without $100 million in annual government subsidies to help make those plans affordable, Tufts would have to raise rates, said Christopher “Kit” Gorton, president of the insurer’s public plans division. “We simply can’t absorb that and happily go on our way,” he said.

“If this bill were to be implemented in its current form, it would have a very dramatic negative effect on the Massachusetts market.”