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Is MassHealth a Budget Buster?

MassHealth costs the Commonwealth $20 billion a year, approximately 31 percent of the the state budget. More that 2 million Massachusetts residents are beneficiaries, almost 30 percent of the population. Of these, 57 percent are children, seniors, or individuals with disabilities. MassHealth provides them with health care coverage, including paying for nursing home and home care and personal care attendants for individuals with disabilities.

And the cost keeps going up year after year, appearing to crowd out other state spending.

But a new study by the Blue Cross Blue Shield Foundation of Massachusetts finds that the cost is not as exorbitant as it may first seem, in large part because the federal government contributes about half of every dollar spent. As a result, the net cost to Massachusetts taxpayers in fiscal year 2025 is projected to be $10.2 billion, about 20 percent of net state spending.

(To explain how the net costs as a percentage of net revenue is determined, total state spending is projected to be just under $65 billion in fiscal year 2025. If we reduce MassHealth spending by $10 billion due to the federal contribution, it would be inaccurate to continue to use the $65 billion figure to determine its share of state spending. So the Blue Cross Blue Shield Foundation in it’s analysis also subtracts the federal contribution for MassHealth and other purposes from the state budget, bringing it down to $50.5 billion. That’s why a $10 billion cut in MassHealth costs reduces its share of the state budget from 31 percent to 20 percent, not to 15.5 percent.)

In addition, MassHealth assesses fees to certain providers and receives rebates from pharmaceutical companies for some prescription drugs. Subtracting these out, total taxpayer cost for MassHealth is reduced further to $8.2 billion, 18 percent of the state budget after these additional revenues are netted out.

Not only does this $8 billion provide vital health and long-term care for Massachusetts residents, but it helps employ Massachusetts health and care providers. They also pay taxes on the amounts they earn, further reducing the net cost to the Massachusetts budget, though this is not part of the foundation’s analysis.

Money well spent? I believe so.

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