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lynn nicholas

A trust fund for new Medicaid funding

Massachusetts continues to expand health care access, improve care delivery, and address its cost — all good news. And there’s more positive health care news on the horizon — provided we take advantage of the opportunity.

In 2014, the federal government will send hundreds of millions of dollars to Massachusetts to help pay for an expansion of Medicaid under the terms of the Affordable Care Act. How we use those Medicaid funds will influence whether the state will have the financial resources to sustain that expansion over time.

The first step in assuring the Medicaid funds are spent properly and as intended by Congress is to segregate them from the general funds of the state. This should be done by placing the new Medicaid revenues into a trust fund that would be dedicated to support Medicaid and other low-income health care programs. It is an idea that makes sense to many consumer, labor, business, and health care leaders.


Our federal system matches some percentage of the funding each state provides to their respective Medicaid programs. Some states receive up to a 73 percent match via these Federal Medical Assistance Percentage payments, while other states, including Massachusetts, get only a 50 percent match. So when Massachusetts spends one dollar on qualified Medicaid programs, the federal government sends us 50 cents. But starting in 2014, the federal government will increase its payments for certain Medicaid populations, generating an additional $350 million to $455 million annually for years to come.

Our congressional delegation fought hard to bring those new Medicaid dollars to Massachusetts, in recognition of our collective leadership and sacrifice in expanding coverage and reforming our health system. But there is a problem — the federal law did not include a specific mandate that the enhanced Medicaid matching funds actually be used to fund Medicaid. If a dedicated trust fund for this federal money isn’t created, future Legislatures or administrations could spend the funds in any way they want without benefiting or investing in Medicaid as intended by Congress.


We should all be proud that Massachusetts is expanding coverage. A lot of our collective health care reform efforts have focused on ensuring that such expansions are both possible and sustainable. And a crucial part of these expansion plans continues to be increased enrollment in Medicaid. Medicaid has grown by more than 300,000 people since June 30, 2006, and the Patrick administration estimates it will add another 220,000 enrollees in 2014. That is very good news, but it comes with a challenge: how to cover the cost in the years to come. Congress has offered a clear-cut answer by providing enhanced federal matching funds.

We should place these precious funds in a secure account that is not comingled with other assets where they could be spent for unintended purposes. If these funds are not used to support Medicaid and other low-income health care programs as intended, we are inviting a funding crisis down the road. It’s a crisis that is 100 percent avoidable if we act now. As the Commonwealth begins in earnest to fully implement the Affordable Care Act, now is the time to create this fund.

Given the ongoing political and fiscal plight in Washington, it is unlikely that Massachusetts will receive such significant financial support for health care and Medicaid in the future. This is a unique opportunity that can’t be wasted. Maintaining expanded coverage, providing sound benefits, and paying adequately for services rendered by those who provide care to low-income patients — these are all challenges that could be addressed to a significant degree if we ensure the new federal health care dollars are used as intended.


Creating a dedicated trust fund for the new Medicaid funding will allow the Commonwealth to sustain over the long term what we have all worked so hard to achieve to date.

Lynn Nicholas is president and CEO of the Massachusetts Hospital Association.