Laboratory News

Massachusetts' Individual Insurance Mandate Proves Costly for Providers

Hospitals are the first providers to feel financial pain from the controversial individual health mandate passed in Massachusetts and which became effective last year.  In July of 2007, the state of Massachusetts began requiring residents to carry health insurance.  The unintended effect of the legislation is that those hospitals continuing to provide care to uninsured persons are losing money. 

One such institution, Cambridge Health Alliance, the state's sole public hospital system, reports that is now only reimbursed for 60% to 70% of the cost of care of providing care to uninsured individuals.  That is compared with full reimbursement previously paid by Massachusetts, according to Dennis Keefe, chief executive officer of the Cambridge Health Alliance.

News reports indicate that some hospitals in Massachusetts that treat high numbers of uninsured patients are contemplating cutting staff and closing services.  Keefe points out that Cambridge Health Alliance is suffering particularly badly because it is the largest mental health provider in the state, has declining inpatient stays, and has a higher immigrant population that is not transitioning from uninsured status. In response to falling reimbursement for care to the uninsured, the hospital system has instituted a hiring freeze, will likely cut 10% of its workforce, or 300 positions, and may consolidate services across campuses.

The number of uninsured in Massachusetts was supposed to dwindle to zero as people moved into Medicaid or the state's new healthcare plan, Commonwealth Care.  Now, safety net providers like Cambridge Health Alliance say the conversion isn't happening fast enough and they are being penalized for it. 

Getting the uninsured into health insurance programs is difficult because they must pay premiums that some cannot afford, particularly with rising costs of energy, food, and housing, said Ellen Murphy Meehan, executive director of the Alliance of Massachusetts Safety Net Hospitals.  Meehan estimates state funding to hospitals for the uninsured has dropped by 50%.

Since March 3 of this year, uninsured patients in Massachusetts must pay fees for hospital stays and emergency room visits on a sliding scale, but hospitals are having a hard time collecting from uninsured patients.  Uncollected copayments add to administrative costs and bad debt for hospitals.

Despite all the problems faced by hospitals treating uninsured patients, Massachusetts' innovative legislation successfully cut the overall number of uninsured residents.  Boston Medical Center, which has just 20% private-pay patients, has seen its share of uninsured patients drop from 25% to 11% in the past 3 years.  "As we cover more patients, the question is whether federal funding will continue to cover the costs," said Tom Traylor, vice president of federal and state programs for the Boston Medical Center.

It remains uncertain how hospital laboratories in Massachusetts may be affected by these developments.  Since those laboratories aren't billing patients directly, they are more likely to see the effects in the form of workforce cuts rather than increases in bad debt owed by uninsured patients.  Policymakers remain hopeful that the state's low-cost insurance option will cause the percentage of uninsured patients in Massachusetts to drop, but it is unlikely that percentage will ever reach zero.  Thus, in the long run, healthcare providers, the state, the insured residents, or some combination of the three will have to foot the bill for those that can't afford-or choose not-to purchase health insurance.

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Mass. safety net frays   (Modern Healthcare subscription required)