WITH MUCH FANFARE last January, the Baker administration sounded the alarm that the Medicaid rolls were soaring because individuals were dropping their employer coverage and choosing instead to enroll in the more generous MassHealth program. To help address the budget problem, the administration proposed a broad tax on employers, mistakenly likening the proposal to the employer fair share contribution that was part of the state’s 2006 universal health care law.
The proposal was flawed from the start. It overstated the movement of employees onto MassHealth and in no way addressed the cause of the problem the administration was alleging. It was simply a stopgap budget fix, generating an estimated $300 million in fiscal 2018 and at least double that in fiscal 2019.
The business community appropriately expressed strong objections to the tax, and virtually all debate since January has focused on the form of the tax and how much should be raised. There has been almost no examination of the “facts” that began the entire discussion, namely, that Medicaid rolls are soaring.
Let’s look at the facts. According to the most recent publicly available data, on December 31, 2016, total MassHealth enrollment was 1,857,013, compared to 1,906,004 on October 31, 2016. That’s a 50,000 decline in two months. The drop from November 30 to December 31 was particularly large — 31,500. Of course, there are always fluctuations from month to month, but it is noteworthy that enrollment on December 31 was virtually the same as a year earlier (1,851,017) on December 31, 2015.
The administration’s fiscal 2018 budget proposal assumes that enrollment will grow to 1.93 million in fiscal 2017 and to 2 million by the end of fiscal 2018. That’s a huge increase of almost 150,000 or 8 percent over the next 18 months. Where is the evidence to support such an increase? The recent data combined with the administration’s varied efforts to hold down enrollment suggest that MassHealth enrollment may have peaked in the neighborhood of 1.9 million.
What are the implications for the fiscal 2018 budget? The administration says that enrollment growth in fiscal 2018 accounts for $600 million in additional expenditures. So if enrollment plateaus at 1.9 million or less, there would be savings of at least $600 million, and perhaps significantly more. The recently approved House budget makes a small allowance for MassHealth enrollment being less than estimated but still includes an undefined tax of $180 million on employers.
There is always a delay in reporting the monthly MassHealth enrollment numbers, but it is striking that it has been at least six weeks, and perhaps two months, since the administration published the December 2016 count. It would be an important contribution to the public debate and policy discussions if the administration promptly released the January and February numbers.
Nevertheless, the published data strongly suggest that the entire assumption on which the employer tax is based — soaring MassHealth enrollment — is faulty. In fact, we may actually have entered a period of modest declines in MassHealth enrollment as the numbers for November and December suggest.
In the meantime, the state has a much larger budget problem, with revenues through 10 months of fiscal 2017 falling a whopping $462 million below projections. That translates into an even larger shortfall in fiscal 2018. Underlying revenue growth is clearly not keeping pace with spending growth, and that doesn’t account for any cutbacks in federal support or the inevitable downturn in the economic cycle.
Depending on one’s perspective, the state has either a revenue problem or a spending problem, or both. But one thing is abundantly clear — a damaging and ill-thought-through tax on employers is not going to address the problem.
Michael Widmer is the former president of the Massachusetts Taxpayers Foundation, a business-backed group that monitors the state’s finances.