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Cost of health initiative up $400m

Number expected to seek coverage exceeds earlier estimate

Email|Print| Text size + By Alice Dembner
Globe Staff / January 24, 2008

Spending on the state's landmark health insurance initiative would rise by more than $400 million next year, representing one of the largest increases in the $28.2 billion state budget the governor proposed yesterday.

The biggest driver of the cost increase is projected growth in the number of people signing up for state-subsidized insurance, which now far exceeds earlier estimates.

State and federal taxpayers are expected to bear nearly all of the additional cost.

Although the price tag for the initiative is ballooning, the governor yesterday reaffirmed the state's commitment to ensuring that nearly every resident is covered.

"We have fully-funded healthcare reform," Governor Deval Patrick said at a news conference. Patrick listed the initiative among several programs started by previous administrations that he supports.

But the long-term cost of the insurance initiative continues to concern pol icy makers and analysts, who are worried that it may become unaffordable.

"These increases are more than anticipated, so we absolutely have to find ways to hold down the rate of growth in future years," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded budget watchdog that has supported the initiative.

This year the state is expected to exceed the initial budget for the health insurance initiative by about $245 million, and next year's budget would boost spending by another $400 million.

The budget now goes to the Legislature, which last year accepted the governor's recommendations on funding the health insurance initiative. A final budget is expected to be approved by the end of June.

The state's top budget official, Leslie Kirwan, said yesterday that projecting costs for the health insurance initiative is difficult because the state is in "uncharted territory."

"We're ultimately working with a lot of uncertainty about the number of uninsured that remain out there in the population," said Kirwan, secretary of administration and finance and chairwoman of the state panel overseeing the health insurance initiative. "Every significant decision we've made in healthcare reform" that draws on enrollment projections is based on "our best educated guess."

The administration is currently working to develop a better way to count the uninsured.

When the law mandating that nearly all Massachusetts residents have health insurance was signed into law by then-governor Mitt Romney in April 2006, the state estimated that about 400,000 residents were uninsured.

Census estimates of the uninsured were far higher - about 650,000 - and many independent observers suggest that the truth lies somewhere in between.

Officials had projected that about 140,000 would enroll in the new state-financed insurance plan, called Commonwealth Care, which provides full or partial subsidies.

But by the end of last month, 169,000 people had signed up for Commonwealth Care, and the state is now estimating enrollment will reach 225,000 by June 2009, the close of the next fiscal year.

More than 70,000 have obtained Medicaid coverage since the law passed expanding eligibility, and the cost for covering those additional people, plus rate increases for hospitals, doctors, and others, is projected to grow significantly above this year's spending.

Those who don't qualify for subsidies or Medicaid are expected to buy private insurance or remain uninsured. Illegal immigrants are not subject to the insurance mandate or eligible for state insurance, but they can qualify for free care.

When the initiative was approved, the state expected that over time there would be a significant drop in spending on healthcare for the uninsured. The initial funding plan counted on shifting a significant portion of those "free-care" costs to pay for insurance subsidies.

But that shift is not going to happen to any large extent in 2009, according to the proposed budget.

To fund the overall increases, the state is counting on getting about half from the federal government. But officials have just begun negotiations on how much Massachusetts will actually receive.

Patrick said he is optimistic about federal support, but acknowledged that "nothing is certain."

Separately, the state is counting on $5 million in revenue from businesses that don't provide insurance for their employees, down from the $24 million included in this year's budget that has not materialized.

Alice Dembner can be reached at Dembner@globe.com.

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