Governor Warns Congress of Possible Effects on State and Local Budgets

I want you to be aware of the implications of the ongoing deliberations in Washington regarding health care. Obviously, the primary concern would be health care coverage, costs, etc., but the decisions that will be made in the coming weeks will have a significant negative impact in coming years on operations in the Commonwealth of Massachusetts and the City of Melrose.

Below is a letter from Governor Baker regarding his concerns about potential loss of over $1 billion in federal assistance annually to Massachusetts due to the proposed health care legislation. This loss of revenue will not only affect the health care of individuals but will also have a tremendous impact on the state’s ability to fund education, local aid, special education costs, and all the programs that are delivered by local government. Now more than ever, the direct and indirect impacts of federal and state decisions are having serious effects on local government. In some cases these effects are positive, and in many others they are negative. But we can never think that these decisions don’t affect us in many different ways. They do, and in fact the withdrawal of the federal and the state government not only is continuing but has been accelerating. This leaves us on our own in many ways to maintain and advance our community.

Here is the text of Governor Baker’s letter:

Dear Delegation Member,

Health care is once again at the forefront of national and state policy discussions; I know we all share the goal of ensuring access to quality, affordable health care coverage for the people of Massachusetts. With Congress set to take up the American Health Care Act (AHCA) imminently, I wanted to share with you my administration’s analysis of the potential effects this bill would have on our state.

The Congressional Budget Office (CBO) released its score of the AHCA on March 13. This analysis is broadly consistent with concerns we have raised, with you and others, regarding the bill’s impact on the state and it residents’ access to affordable healthcare. Applying CBO’s assumptions to Massachusetts results in at least $1 billion of reduced federal revenue beginning in 2020, and we estimate reduced revenue of $1.3 billion in 2021, and $1.5 billion in 2022, with likely a greater annual impact in the years that follow.

Specifically, our estimate extrapolated from the CBO analysis of a $1.5 billion impact for FY 2022 includes $1.3 billion of annual MassHealth federal revenue losses and $200 million in annual reduced federal subsidies for private insurance through the Connector.

Several key areas of concern for Massachusetts were not included in the CBO analysis and could further impact the Commonwealth’s budget. For example, the CBO estimate does not address 1115 waiver payments that we believe this bill would put at risk. By FY22, the Commonwealth estimates an additional $425-475 million per year of reduced federal revenue in potential elimination of 1115 payments not captured under the per capita targets, including federal matching funds for a state-run ConnectorCare Wrap subsidy.

The actual experience for these and other factors is significantly dependent on how the U.S. Department of Health and Human Services implements the legislation and unpredictable factors in the future (e.g., pharmaceutical growth).

In addition to reduced federal revenue for Medicaid, the CBP also projects a reduction in employer-sponsored health insurance of 7 million people nationwide as a result of the repeal of the federal Employer Mandate. This would exacerbate a trend that Massachusetts has seen over the last several years. Massachusetts repealed the Chapter 58 Fair Share Contribution in 2013 in order to comport with the ACA. My administration has proposed reinstating an employers’ shared responsibility for the costs of health care. This would be increasingly important if the federal Employer Mandate were repealed, as the AHCA proposes.

The Commonwealth does have certain protections in place that could mitigate the impact of some of these changes. Massachusetts retains its individual health insurance mandate, reducing the likelihood that many people would drop out of the insurance market due to the repeal of the federal mandate. Massachusetts also has protective insurance coverage laws that would not be superseded by the federal legislation.

The AHCA includes a provision that would prevent Medicaid from reimbursing Planned Parenthood for providing important health services such as cancer screenings. My administration opposes this provision, and has already committed to funding these services with state dollars if it should pass.

During conversations with governors across the country, the Trump Administration has expressed a general openness to providing greater state flexibility with respect to health care, including through a letter issued by HHS Secretary Price on March 14 to states. Our administration will pursue additional flexibilities to stabilize our markets and ensure continued coverage for residents and we urge you to support these efforts by leading discussions in Congress to ensure the people of Massachusetts continue to have access to a quality health care system.

Overall, our analysis indicates that the AHCA would increasingly strain the fiscal resources necessary to support the Commonwealth’s continued commitment to universal health coverage. I hope this information is helpful to you as Congress takes up the American Health Care Act.

My administration and I will continue to stay in touch with you as we work together to ensure access to quality, affordable health coverage for all Massachusetts residents.

Sincerely,

Charles D. Baker
Governor

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