State faces a gap as Medicaid use rises

By Michael Norton and Kyle Cheney
State House News Service / December 14, 2010

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Massachusetts taxpayers have delivered more revenue to the state Treasury nearly every month since October 2009, but the Patrick administration still faces a significant budget gap, largely because of soaring costs in the state Medicaid program.

Medicaid has attracted almost a quarter million new enrollees since June 2006, while playing a major role in helping the state to achieve the lowest rate of uninsured individuals in the nation.

Three-quarters of the estimated 410,000 individuals newly insured in Massachusetts since passage of the 2006 health care law have found coverage in publicly subsidized programs, including the Medicaid or MassHealth system, according to a state report released Friday. Only 25 percent of the newly insured obtained coverage through employers or by purchasing coverage on their own.

In addition, a State House News Service review of state finance documents and updated Medicaid enrollment statistics shows that enrollment and costs have shot up during the recession, hitting struggling taxpayers with a big bill while myriad other services were slashed.

The trends point toward an entitlement program with runaway costs that is absorbing new state revenues and leaving services in areas such as public safety, human services, education, and local aid subject to continuing budget cuts.

In October, three months into the state’s new fiscal year, Governor Deval Patrick and the Legislature directed another $327 million to the state’s $10 billion Medicaid program when allocating about $400 million in onetime federal funds approved by Congress and President Obama.

Less than three months later, the Patrick administration is warning of up to $500 million more in additional spending that might be required, in part to keep pace with caseloads at Medicaid, which alone accounts for about a third of all state government spending.

Overall, Medicaid enrollment since June 2006 has grown 23.7 percent, or by 244,780 members. The program counted 1,279,225 members by September 2010.

Budget writers in the Legislature say Medicaid growth has confounded Beacon Hill for years.

“It continues to take money away from other accounts, because that continues to increase at a much higher level than anything else in the state budget,’’ Senator Steven Panagiotakos, the Senate’s outgoing budget chief, said yesterday.

But Senate President Therese Murray questioned whether projected Medicaid costs are accurate.

“We frequently get really bad advice, numbers from Medicaid that we then go back and change later,’’ she told reporters after a meeting with Patrick and House Speaker Robert A. DeLeo. “What we’d like to know is what the real numbers are.’’

Other fiscal observers were less restrained.

“It’s a huge problem,’’ Massachusetts Taxpayers Foundation president Michael Widmer said, calling Medicaid “seriously underfunded.’’

Gary Gottlieb, president and chief executive of Partners HealthCare, said in a recent interview that many of the increased costs borne by Medicaid represent patients who may have been obtaining free care beforehand.

Although Medicaid costs are climbing, he said, the worrisome part is that doctors who accept Medicaid patients have seen reimbursement rates cut, which “overloads the burden on the commercial industry.’’

Neil Cronin of the Massachusetts Law Reform Institute told Patrick administration officials at a hearing yesterday that the health care overhaul could not have happened without Patrick’s commitment to Medicaid.