Mass. Medicaid waiver approved through June 2014

The federal government today approved a plan that extends Medicaid funding for the state’s innovative health insurance law through mid-2014 and shifts the way hospitals that treat a large portion of poor patients are paid for their care.

The Centers for Medicare & Medicaid Services sent a letter to Dr. JudyAnn Bigby
, the state Health and Human Services secretary, saying it would extend the state’s so-called Medicaid waiver through June 2014.

The waiver is key to funding the 2006 health care law that provides subsidized insurance plans for low-income people and requires most state residents to have health insurance. It expired in June and federal officials have been issuing incremental extensions as they negotiated with the state.

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The $26.75-billion deal, the result of a year and a half of negotiations, includes $120 million in new federal funding to change the way safety-net hospitals are paid, moving them toward a system in which they are given a set budget to treat Medicaid patients. Hospitals eligible for the program are Boston Medical Center, Cambridge Health Alliance, Brockton Hospital, Lawrence General Hospital, Holyoke Medical Center, and Mercy Medical Center in Springfield.

The hospitals were receptive to the idea, Bigby said. “We worked with them to develop the strategy, to get them to agree to the transformation that they have to make,’’ she said.

Last year, Boston Medical Center received about $90 million as a supplemental payment for treating a large portion of the state’s Medicaid patients. In the coming year, under the waiver, the hospital will be eligible to receive up to $103 million and must meet quality and cost benchmarks to get all of that money, said chief executive Kate Walsh.

The new system will help to stabilize the hospital’s finances and improve patient care, she said. “It provides support and financial resources to begin the transformation so that we’re ready for whatever health care reform brings,’’ she said.

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Hospitals such as BMC that care for many poor patients say they have suffered under the 2006 law because state aid they received for treating the uninsured was diverted to pay for insurance subsidies. And they say the number of newly insured patients they now see has not made up for the lost revenue.

News of the waiver approval came a day after federal officials announced that five Massachusetts systems, including Partners HealthCare and Steward Health Care System, have agreed to be paid on a budget system for the management of elderly and disabled patients on Medicare, starting Jan. 1.

Governor Deval Patrick has proposed legislation that would move more hospitals and doctors to such a system, known generally as global payments. Currently, most are paid a separate fee for each treatment, test, and visit — a system that has been blamed for driving up costs because it creates incentives for unnecessary care.

Brian Rosman, research director for the consumer group Health Care for All, said the waiver “reflects the shared principles of both the Obama administration and the Patrick Administration to use Medicaid to remake our (health care) delivery system.’’

More than 1.3 million people in Massachusetts have some form of Medicaid coverage. Rosman said the waiver “will be good for both the Medicaid recipients and for the state.’’

Bigby said the initiative to restructure payment systems was one reason that negotiations dragged on. The other was a new plan to cover early intervention services for some children with autism.

The state also will launch a pilot program to give providers a “bundled’’ payment for the work they do with low-income children with high-risk asthma, which would provide money for health workers to visit the children’s homes.

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“By allowing providers some flexibility about the type of care they’re providing to the kids, we can do a better job of controlling their asthma and they will stay out of the hospital,’’ Bigby said.

The new agreement also streamlines enrollment for children. It allows the state to use income information in the state food stamp program to calculate eligibility for Medicaid coverage rather than requiring annual re-enrollment. That change is meant to improve continuity for families and reduce administrative costs for the state, Bigby said.

The waiver represents “a strong step forward’’ for the state’s health system, Cindy Mann, deputy administrator of the Centers for Medicare & Medicaid Services, said in an e-mail.

“The demonstration will support the Commonwealth’s delivery and payment reforms while also helping it to move forward on several innovative new programs,’’ she said.

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