Gov. Charlie Baker will sign into law $200 million in new fees and fines on Massachusetts employers to help pay for MassHealth without sought-after reforms to the program, putting his faith in the Legislature to follow through on pledges to work with him this fall to control growth in Medicaid and health care spending.
Risking political backlash from influential business groups, Baker, in an interview in his office on Tuesday, said he hoped the decision to sign — and not veto — the measure on Wednesday would remove the controversial employer assessments as a hot potato in the Beacon Hill debate over rising Medicaid spending.
With the focus off the assessments, the governor believes his administration and Democratic leaders will be able to zero in on reforms in the coming months that will put MassHealth on a more sustainable trajectory. Democratic leaders in the House and Senate would appear to have the votes to override a veto, but the issue would have lingered over the Legislature for weeks until they return after Labor Day from their summer recess.
"The Legislature told us they would work with us on this, and we're going to take them at their word," Baker said. The Republican said public comments and private conversations with legislators have convinced him they are serious about tackling the spending problem.
"The Legislature told us they would work with us on this, and we're going to take them at their word."Gov. Charlie Baker
MassHealth, which offers insurance coverage for 1.9 million low-income and disabled residents, has a budget of more than $15.6 billion in fiscal 2018, and without the governor's reforms is expected to grow by $300 million this year.
Baker returned the employer assessments and unemployment insurance (UI) rate relief to the Legislature last month, insisting they be packaged with MassHealth eligibility reforms to address the long-term growth trend in the program, which is crowding out available funds for things like education and public safety.
He gave lawmakers 60 days to hold hearings and vote on his legislation. They quickly held a hearing and promptly rejected his MassHealth reforms by veto-proof majorities, sending the employer assessments and UI measures back to the governor with a sign-or-veto option.
The package of assessments, reforms and UI rate relief was carefully crafted over several months with input from the business community after lawmakers and companies initially balked at the administration's proposal in January to tax employers at $2,000 a head to pay for the shift of full-time workers from commercial coverage to MassHealth under Obamacare.
He presented the recommendations to budget negotiators in late June -- too late, lawmakers said, for them to properly vet the proposal.
In signing the assessments, Baker risks angering those members of the business community who negotiated the package with the administration and conditioned their support of the assessments on being part of a package with longer-term MassHealth cost controls.
"We urge Governor Baker to veto the health care assessment in its current form. Not only do we believe that the time has come to prioritize reining in MassHealth spending, but we fear that the "temporary" healthcare assessment may ultimately be added to the long list of permanent costs for Massachusetts small businesses. Our members already struggle to provide health coverage for their workers and do not need an additional expense to make a bad situation worse," National Federation of Independent Business Massachusetts State Director Christopher Carlozzi said in a statement last week.
The governor also acknowledged risk in giving up some of his leverage and political positioning with the Legislature to pressure them to act on health care reform, but believes that signing the bill presents the best opportunity to begin a productive dialogue with lawmakers.
When asked how intends to smooth over his decision with business groups like Associated Industries of Massachusetts and the NFIB, Baker said, "I believe that this is the best way to ensure that they and we and the Legislature get what we all want, which is a sustainable MassHealth program."
One assessment will boost a per-employee fee, known as the Employer Medical Assistance Contribution, from $51 to $77 per year for employers. The other will penalize employers with a fine of up to $750 per employee if their workers choose MassHealth even though they have access to affordable insurance through work.
Both assessments will sunset after two years.
The bill Baker plans to sign would also reduce scheduled increases in UI rates over the next two years by $334 million, helping to offset the cost of the new assessments for many businesses.
House Ways and Means Chairman Jeffrey Sanchez said the vote to reject Baker's reforms was not an end to the debate, and Senate Ways and Means Chairwoman Karen Spilka sought alternative recommendations from stakeholders that might be considered as the Senate prepares to draft a bill of its own this fall.
Many lawmakers at last week's public hearing expressed concerns with Baker's proposal to shift 140,000 low-income MassHealth enrollees onto subsidized commercial plans offered through the Health Connector.
While those new plans could still come without a premium, families might have faced higher out-of-pocket costs, including co-pays and the loss of dental coverage.
Secretary of Health and Human Services Marylou Sudders, who joined Baker in the interview Tuesday, said she believed she could work to address many of their concerns, including a potential cap on co-pays for plans offered through the Connector.
"We can find a path," she said.
Both Baker and Sudders suggested it was unlikely that MassHealth spending could be sufficiently brought under control with measures targeting the underlying cost-drivers of health care without addressing enrollment.
Baker said the overarching goal is to rebalance the market and stop the blurring of responsibility for coverage of full-time workers between commercial plans and MassHealth.
"The state, to the extent we can pay a role in supporting people who are low-income but working people who have access to coverage through their employer, we should support them, as we did and as we have historically through premium assistance and other kinds of premium assistance and co-pay assistance and other ways of doing that," Baker said.
The governor did not put a specific timetable on when he would like to see legislative action on health care reform, but said the fall would make sense before he begins to prepare the fiscal 2019 budget and lawmakers' attention gets pulled elsewhere.
He also said that he still believes the fiscal 2018 budget will have a roughly $150 million hole that will have to be addressed unless the Legislature acts to generate savings in MassHealth.
In mid-July, the Massachusetts Taxpayers Foundation speculated about the situation that has come to pass.
"Should the Legislature reject the Governor's proposed amendment to couple long-term MassHealth reforms with a temporary assessment on employers, the Legislature will need to find $283 million elsewhere ($200 million from the assessment in addition to the $83 million in MassHealth savings) a task that will be difficult on top of the spending reductions already made in Conference," the foundation wrote. "The Legislature's approach to the Governor's proposal will be pivotal to the state's fiscal condition in the months ahead."
As for the federal waiver requests that the administration made to erect a "gate" that would make full-time workers with access to affordable employer-sponsored coverage ineligible for MassHealth, Baker and Sudders said they intend to proceed with the public comment period to get feedback as the process at the State House plays out.
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