The Massachusetts Health Reform Plan: A Brief Overview

RS22447 -- The Massachusetts Health Reform Plan: A Brief Overview

May 26, 2006

Summary

In April 2006, Massachusetts passed legislation that aims to achieve near-universal health insurance coverage by expanding Medicaid and State Children's Health Insurance Program (SCHIP) eligibility, providing premium subsidies for certain individuals, and mandating the purchase of insurance for those who can afford it. To make private health insurance plans more affordable and accessible, it modifies state insurance laws (e.g., it merges the state's non-group and small group markets) and creates a public entity called the Connector to serve as a clearinghouse for the purchase of insurance by small employers and individuals who are not offered subsidized insurance by a large employer.

To pay for the legislation, the state will redirect some existing Medicaid funds that are used to reimburse health care providers (primarily hospitals) for treating uninsured and other patients who generate uncompensated care costs. It will also obtain additional federal Medicaid and SCHIP dollars using new state general fund appropriations and revenues from employers that do not offer health insurance. Another significant source of funding, while not necessarily flowing through state coffers, is the mandate that requires individuals to purchase insurance or face financial penalties. Over time, the state expects to redirect additional funds from uncompensated care reimbursement to other uses (e.g., premium subsidies) as its uninsured rate declines. However, the legislation continues to provide significant support for hospitals and other providers.

This report highlights major elements of the Massachusetts legislation and raises issues that Congress and other observers may consider as details of the state's health reform plan are worked out during implementation. It will not be updated.