State, Feds Reach Five-Year, $41.4B Health Care Accord

The Patrick administration early Friday evening announced a five-year health care deal with the federal government worth $41.4 billion, which will succeed a three-year $26.75 billion waiver agreement that expired June 30.

In response to an afternoon inquiry from the News Service about a deal being reached, administration officials after 6:30 p.m. Friday confirmed that the so-called 1115 demonstration waiver deal had been struck with the Obama administration on Thursday night.

“Massachusetts has proven itself a national leader in health care reform with our success in extending coverage to nearly all residents of the Commonwealth,” Gov. Deval Patrick said in a statement. “This new agreement will help us build on our success while also spearheading innovative cost-containment efforts across the state. We are thankful for the support of the Obama Administration, the Massachusetts Congressional Delegation, and our partners for sharing our commitment to health care reform.”

The overall deal represents about $640 million less per year compared to the most recent waiver, but two top Patrick administration officials during a conference call ticked through a long list of areas where they said support from the federal government, both in financial terms and with regard to key health care cost containment, payment, and care delivery reforms, would increase in the coming years.

“We’re incredibly excited about support for the Commonwealth of over $41 billion over the next five years,” said Health and Human Service Secretary John Polanowicz.

Asked about the lower average annual support compared to the previous waiver, Polanowicz explained the five-year agreement does not include funding associated with the state’s safety net care pool in the fourth and fifth year of the waiver because there’s an agreement and timetable in place to redesign that pool, including a process that will ensure hospitals are involved.

Officials said the new deal reflected a three-year increase in safety net care pool funding of 15 percent, compared to the previous waiver.

The deal provides $230.2 million per year over three years for care delivery “transformation initiatives,” a 10 percent increase from the previous waiver. The initiatives include shifting safety net hospitals into so-called integrated care delivery systems and away from fee-for-service payments that have fallen out of favor among policymakers because of their contribution to rising health care costs.

Officials applauded the length of the agreement, saying the five-year duration offered more stability, and said it “fully aligns” the state’s subsidized coverage programs with the Affordable Care Act.

The waiver features $771 million, over three years, for Medicaid-eligible programs such as homeless supports, chronic disease interventions, substance abuse prevention and rehabilitation, and expanded access to children’s behavioral health services.

For children, the agreement will expand the state’s implementation of pilot programs “that target coordinated care and specialized services to children with severe asthma and autism through enhanced intervention and treatment,” according to the administration.

And while the agreement arrives four months after the last accord ended, state Medicaid director Kristin Thorne said negotiations didn’t begin until February and typically take 18 months to complete.

Thorn and Polanowicz were hard pressed to name any of the state’s demands that hadn’t been granted during talks with the Obama administration, but acknowledged the state asked for more funding than it received in the final deal.

The administration officials said the waiver supports Cambridge Health Alliance, which Thorn called the state’s “only public hospital” and a “unique provider,” as well as Boston Medical Center, another facility that treats a disproportionately high number of low-income individuals and individuals without insurance. Under the deal, Cambridge Health Alliance will receive $308 million per year for three years, a 10 percent increase from the previous waiver.

Problems with the state’s health exchange website led to more than 300,000 individuals being placed in temporary Medicaid coverage. Thorn said the waiver supports the costs of that coverage, providing a 50 percent reimbursement from the federal government with the possibility of higher reimbursements once eligibility determinations are made. “That is captured in our waiver,” she said.

Asked whether the funding deal would keep pace with rising costs of Medicaid managed care programs, Thorn said she was “incredibly pleased” with the level of funding support and didn’t foresee any challenges in that regard.

The administration announced the deal with statements of support from the Sisters of Providence Health System, Holyoke Medical Center, the Autism Insurance Resource Center at UMass Medical School, Boston Medical Center, Lawrence General Hospital, Signature Healthcare, Steward Health Care, Cambridge Health Alliance, Health Care For All, and Health Care Financing Committee Co-chairman Sen. James Welch.

“I am very pleased that the renewal of the 1115 waiver has been finalized,” said Welch. “The renewal of the waiver will bring much needed funding to the Commonwealth, which will help to rein in costs as well as secure the continued success of universal health care coverage for Massachusetts residents.”

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