It’s Time To Pay Up For Mass. Health Costs Law

By Martha Bebinger

Guess who has to write the state a check for the lion’s share of funding for the newish health costs law?  Almost half the money will come from Partners Healthcare and Blue Cross Blue Shield of Massachusetts (see the charts below).

A little background: The law that’s supposed to improve health care quality quality and control costs also imposes a hefty fee on some hospitals and insurers (as well as some other “payers”). The law says the surcharge will raise $225 million for distressed hospitals, a prevention fund, electronic medical records and the agency that will bring the law to life.

Now we have the first drafts of who will pay and how much.  Among hospitals, only the Partners system, Caregroup (bet you haven’t thought of this organization for a while) and Children’s meet the criteria for the fee (the criteria are spelled out in draft regs at the bottom of this page). Partners took a $42mil charge, in anticipation, last year. Caregroup and Children’s have told the state they may ask for a reduction, claiming they don’t fit the criteria.

  1. Partners Healthcare – $42 million
  2. Caregroup – $11m
  3. Children’s – $8m

Now the insurers. Here’s the full list of 96 payors and their proposed fees. The top five are:

  1. Blue Cross Blue Shield of MA – $65m
  2. Harvard Pilgrim Health Care – $21m
  3. United Healthcare – $9m
  4. BMC HealthNet Plan – $7m
  5.  Neighborhood Health Plan – $7m

By the way, the law says insurers can’t increase premiums to cover this surcharge.

None of this is set in stone yet. The proposed regulations that define who has to pay, how these fees were determined, on what grounds hospitals can appeal, and what happens if the state brings in less than $225 are here (at the bottom of the page).

The insurers that handle mostly Medicaid patients are questioning whether they should pay a penalty, because the state would essentially be taxing taxpayer dollars (and there’s a bit of a shell game that boosts the federal reimbursement, but someone else will have to explain that to you). So this is still a work in progress.

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  • Josh Archambault

    “the law says insurers can’t increase premiums to cover this surcharge.”

    Great, I guess they will pull it from the magical pot of money under the bed.

    I have yet to hear how the state can track or even prove that these surcharge funds will not be passed on to consumers. Anyone hear differently?

  • Reasonable?

    Why is this so complicated?
    We want lower health care costs.
    We get lower cost by an industry being open to new innovations and competitors that deliver those innovations.
    The penalty and redistribution strategy is unlikely to change the competitive landscape.
    Trying to regulate down to lower cost does not seem like a sustainable strategy.

  • vickim.

    Great example of stats in a vacuum. What Martha B. fails to
    include is that the regulations which led to these charge estimates came from a
    series of investigations into how Partners and other providers were
    overcharging for services and wielding monopolistic market powers to force huge
    payment increases from the health care payers. Additionally, BC was not looking much like a”not for profit” and likewise put itself in the cross-hairs of
    healthcare payment reform. The truth is that the hearings which eventually led to these
    “penalties” or cross subsidies (some might call it wealth
    redistribution) was led by Bruce Bullen and the payers demanding that state
    government take a close look at the
    behavior of these large hospital systems. All that said, when Partners pays the
    $65M that’s $65M that will not go to funding large vanity building projects
    that create real living wage jobs with unions. And therein lies the rub for

    Though some might say that these charges are unfair, the
    calculations and regulations that drove them are the result of many
    stakeholders within the industry saying that the big kahunas have to pay their
    fair share to make sure everybody in the state has equal access to quality care

    • Martha Bebinger

      Hi Vickim – you raise some interesting points. I think you’re suggesting that this surcharge replaced the impact and intent of the luxury tax that was in the original House bill, is that right?

      I’m not following each step in your line of reasoning. The hearings on these new regs haven’t been held yet. Maybe you’re referring to hearings on the bill? Bruce was at Blue Cross last year when the bill was drafted, so what hearings did he run? How do you get to $65 mil for the Partners surcharge? Thanks for clarifying.

  • janice

    I am no fan of the Nanny State.
    The right to choose what we eat is as much a cornerstone of a free and democratic society as free speech and a free press. Ditto for The Cheesecake Factory’s right to pile on the salt, fat, and sugar.
    But just because they can, it doesn’t mean they should.

    The Cheesecake Factory crosses the line.