Michael WidmerSun staff photos can be ordered by visiting our SmugMug site.
Michael Widmer

Sun staff photos can be ordered by visiting our SmugMug site.

By Michael Norton


BOSTON -- A federal waiver critical to the efforts in Massachusetts to pursue universal health care coverage, rein in cost increases, and deploy payment delivery reform is hung up in secret talks between outgoing Gov. Deval Patrick's administration and the Obama administration.

In late 2011, when Patrick announced the current $26.75 billion, three-year waiver, he said more than 98 percent of Massachusetts residents were insured and predicted the waiver would help the state tame health care cost growth. Now, as his time in office winds down and with the state's Medicaid rolls growing, negotiating details of a new waiver represents one of his biggest remaining responsibilities.

The Patrick administration in September 2013 applied for a five-year extension of the waiver, calling it "the centerpiece of the state's health care reform," but talks over conditions of the waiver have extended beyond the scheduled waiver start date of July 1 and will continue into September, the News Service learned on Friday.

"Of all the fiscal risks facing the state in the near future, the outcome of these negotiations is far and away number one," Michael Widmer, president of the Massachusetts Taxpayers Foundation, told the News Service in an interview this week. "There is a huge amount at stake in getting the maximum possible federal funding. I mean, the state's Medicaid costs are soaring so it's absolutely critical that we get as much federal support as possible.



Federal officials have agreed to two monthly extensions of the current waiver and on Friday, a Patrick administration official said another extension, through Sept. 12, has been received. "We are now doing shorter extensions as we move closer to finalizing the waiver agreement," said health and human services spokeswoman Julie Kaviar.

Administration officials will not discuss negotiations, but people familiar with the underlying issues believe points of conflict could be funding levels for so-called safety net hospitals in Massachusetts, cost sharing for problems that have arisen during the rollout of the Affordable Care Act, as well as the length of the new waiver.

The waiver - known as the Massachusetts Section 1115 Demonstration Project - dates back to 1997. It provides a base of support to the extensive and expensive efforts within state government to pursue universal insurance access under a 2006 state law, enact cost containment and new payment models authorized in a 2012 state law, and implement elements of the federal Affordable Care Act.

Josh Archambault, senior fellow at the Pioneer Institute for Public Policy, said that since Gov. Mitt Romney signed the state's universal health care law in 2006 "negotiations with the federal government have seemed to take longer and longer" on waiver renewals and updates.

"It appears to be a much more complex and laborsome process to reach a final agreement," he said in an interview this week. "I think it's because the cost has just grown every time they've had to renew and so the federal officials have tried to not give away the whole farm but to make sure the Massachusetts reforms stay afloat, so they have had to reach a compromise each time around."

The 2011 waiver was $5.7 billion larger than the previous waiver, helping state government to keep up with rising costs of health care programs, including Medicaid, the largest program in the state budget.

"Really a lot is at stake here in terms of subsidized coverage through MassHealth and also through Connector Care and also significant funding that goes to safety net hospitals and community health centers,' said Kate Nordhal, senior director of the Massachusetts Medicaid Policy Institute and a former state health care finance and policy official.

Waiver talks in the past were assisted by former Sens. Edward Kennedy and John Kerry, but this time around are occurring with Sens. Elizabeth Warren and Edward Markey, both new to the U.S. Senate, and amid constant partisan agitating in Washington over treatment of the states in health care policy and financing.

The waiver has stretched on through four governors and in many ways formalizes the complex agreements underpinning the state's health care policy goals and financing arrangements.

While acknowledging that they are not privy to the substance of the negotiations, Widmer and Archambault identified numerous areas where state and federal officials may be having difficulty agreeing.

In addition to supplemental payments to hospitals that serve disproportionate numbers of publicly insured or uninsured patients, Archambault said there could be wrangling over covering certain premium costs under the 2006 state law and costs associated with tens of thousands of individuals recently placed on temporary Medicaid coverage due to state website problems.

Apart from the temporary enrollees, Widmer said talks could extend to federal assistance to cover what he called the "Connector fiasco," a reference to costly website failures that forced the Patrick administration to mount an extensive recovery effort.

Funding for "safety net" hospitals is likely a point of discussion, he said, as well as funding for different populations of people covered by Medicaid.

"There are many fine points that in the end are major as to whether we get the kind of federal support that we would like," Widmer said.

Widmer said Medicaid managed care organizations are "hemorrhaging money" due to underpayments from the state in connection with an influx of patients showing up at health care facilities and receiving care while being enrolled in Medicaid.

Widmer said the Medicaid program's data analysis capabilities are "seriously wanting" and there is some mystery about "where are all these people coming from" given frequent claims by state officials of the nation's highest insured rate. "It is a big question," he said.

According to the state Office of Medicaid, the waiver's goals are to maintain near-universal coverage; redirect spending from care delivered to individuals without insurance to insurance coverage; enact reforms that promote care coordination and integration of services, disease management, successful care transitions and improved health outcomes; and alternative payment methods to plans and providers that reward accountability for quality and costs.

Enrollment in MassHealth, which provides insurance to low-income residents, has risen from 700,000 before the start of the demonstration waiver to roughly 1.55 billion in 2012 when combining MassHealth with the Commonwealth Care program. According to the waiver, from fiscal 2005 through fiscal 2011, spending per MassHealth member increased an average of 1.6 percent per year, while enrollment grew an average of 4.5 percent per year over that period.

In the state's application, officials note that 3.1 percent of people in Massachusetts were uninsured in 2011, compared to 16 percent nationally. They also highlight efforts to reduce barriers to coverage, including the placement of about two-thirds of all MassHealth members in managed care programs.

State officials say the five-year term of the waiver extension will support the full implementation of an integrated care model known as One Care for individuals under 65, including the disabled, who are eligible for Medicaid and Medicare and who have traditionally been heavy users of health care.

Widmer noted the Obama administration recently declined state requests to control costs by sticking with their own insurance rating factors, rather than those included in Obamacare. And while Gov. Deval Patrick's close relationship with Obama could prove beneficial, Widmer said there are other factors in play during the negotiations.

"There is huge sensitivity in Washington to granting any special consideration to any one state," he said. "That means that HHS is going to have to be very careful about how they handle the waiver with Massachusetts. They may want to be helpful but find their hands tied because of the precedent it may set with other states."

The waiver's length means Patrick's successor will need to adjust. "Whoever he or she is is going to have to live with this, for better or for worse," Widmer said.

Amy Whitcomb Slemmer, executive director of Health Care for All, said the waivers have been "incredibly important" to health care delivery efforts in Massachusetts and state officials have been able to navigate disagreements with their federal counterparts in the past.

"We feel confident that the same will happen this year," she said.