INSIDE THE ISSUE

> Senate Reconciliation Bill
> Insurers at DOI Hearing
> We’re Number One!
> Senate Supplemental Budget
> Halting NIH Cuts
> SCOTUS Limits Gender-Affirming Care

MONDAY REPORT

Senate Finance Releases Its Reconciliation Bill

Last Monday, the U.S. Senate Finance Committee Chair Mike Crapo (R-Idaho) released a budget reconciliation health package, which includes significant changes from the House’s “One Big Beautiful Bill” that passed on May 22. (Here is a section-by-section summary of the bill.)

The Finance Committee recommendations complete a series of committee proposals under review as Senate Majority John Thune (R-S. Dak.) seeks to finalize a substitute to the House bill for floor consideration this week.

The Senate Finance health text maintains many of the core provisions of the House bill with the following notable differences:

• It retains the House-proposed moratorium on new or increased Medicaid provider taxes, but the Senate text proposes lowering the permissible “safe harbor” cap on these taxes from 6% of patient revenue to 3.5% by 2031 through annual 0.5% reductions beginning in 2027 – exempting nursing and intermediate care facilities.
• It retains the House-proposed limits on Medicaid state directed payments (SDPs) at 100% of the Medicare rate for expansion states (110% of the Medicare rate for non-expansion states). However, the Senate text limits grandfathering to SDPs approved by May 1, 2025, and requires that grandfathered SDPs not in compliance with the new limits have their rates reduced by 10 percentage points annually until meeting 100% of allowable Medicare payment limits, beginning in 2027.
• It retains the House-proposed Medicaid work requirement, but limits exemption to the rules only to individuals with dependents aged 14 or younger. The Senate text also allows states to delay the implementation of the work requirements until 2029 if they demonstrate a good faith effort and progress towards implementing them.

The Finance proposals are limited to issues within the committee’s jurisdiction (i.e., Medicaid, Medicare, tax). The previous week, the Senate Health, Education, Labor and Pensions Committee Chair Bill Cassidy (R-La.) released proposals that include changes to the Affordable Care Act insurance marketplace and health-related federal student loan programs.

Considerable pressure remains for Congress to enact this legislation before the July 4 holiday recess, or at least for Senate passage by then, but delays are possible and the White House has softened its messaging around the deadline for final passage. The narrow GOP Senate majority of 53 seats leaves little wiggle room to garner 51 votes for passage and lends clout to those willing to hold their vote until their preferred provisions are addressed. The Senate bill will require reconsideration by the House and its own narrow vote 215-214 leaves little room for disagreement.

Fingers Pointed over Affordability, but the Problem Runs Deeper

Commercial insurers participated in a public information session before the Division of Insurance (DOI) last Tuesday to explain their proposed merged market rate changes that range from 9.9% to 16.2%, effective January 2026. The average proposed rate increase across the eight plans that participate in the merged market is 13.4%.

The proposed spike in rates announced last month naturally reverberated through the state’s economic circles and the resultant sticker shock caused a new round of finger pointing among insurance and business groups as to who/what was responsible for the hikes. As has become commonplace at healthcare policy forums in recent years, the focus from several advocacy organizations at last Tuesday’s session fell squarely on hospitals and health systems, as well as the pharmaceutical industry and especially on the high-cost GLP1 weight-loss drugs.

Representatives from those groups once again cast blame on providers for “excessive” rate demands, with one going as far as to suggest that hospitals are engaged in a form of “price gouging.” Absent from much of that opening session, however, was commentary about the root factors that have been eroding the entire healthcare sector and driving the cost pressures that providers, patients, and businesses are all feeling today.

“The concerns expressed at today’s DOI hearing are a symptom of the larger cost crisis that hospitals across the nation have been sounding the alarm about for half a decade,” said MHA Senior Director of Managed Care Policy Karen Granoff in the statement following the Tuesday session.

In response, MHA submitted comments to DOI that provide a snapshot of these foundational – and worsening – cost pressures, as well as opportunities for united solutions that are responsive to today’s environment.

As MHA has recounted in nearly every legislative hearing, editorial board meeting, public forum, and in its publications and policy papers, hospitals and health systems have been besieged by intense financial pressures for the past half-decade – all of which are affecting their stability and overall costs. Hospital wages are rising due to the shortage of healthcare workers and those workers make up more than 60% of a hospital’s operating costs. Capacity challenges persist and hospitals are devoting more than $400 million each year for unreimbursed care as patients remain stuck in acute care facilities and are unable to be discharged. The Health Safety Net is frayed, with hospitals alone shouldering a $250 million funding shortfall this year. Operating margins are razor thin; patients are generally sicker, older, and in need of longer hospital stays; and now, the reconciliation bill that the U.S. House passed would cut $1.75 billion in federal Medicaid funding to Massachusetts, lop coverage away from 250,000 commonwealth residents, and so disrupt future funding mechanisms that the state, and subsequently hospitals, will experience further healthcare revenue losses. Last week, the U.S. Senate announced even more draconian cuts in its reconciliation bill.

Many of the DOI session comments from health plan representatives themselves did, in fact, center on the overall unhealthy state of the healthcare sector in Massachusetts and across the nation. One representative from UnitedHealthcare noted that the high proposed rates for Massachusetts actually are less than the increases proposed in other areas of the U.S. In Rhode Island, for example, requested rate increases, range, on average, from 23.7% in the individual market to 22% in the small group market and more than 24% in the large group market.

“Hospitals recognize that even though this collection of factors is beating them down, they have a role to play in what should be a statewide effort to control costs,” Granoff said. Among the actions hospitals and health systems have taken are steering patients to lower-costs settings and standing up urgent care facilities as alternatives to emergency departments (EDs); expanding innovative programs outside the hospital such as telehealth, hospital at home, and mobile integrated health; addressing social determinants of health to help populations avoid eventual hospitalizations; working to expand the behavioral health workforce to staff additional sites of care so patients can be moved quickly out of EDs; growing the primary care workforce; reducing unnecessary, low value, and duplicative care; and generally improving efficiency.

In its written comments it submitted to DOI, MHA called for a collaborative approach that does not “rehash age-old debates” but that addresses capacity, access, financial stability, and easing administrative burdens in the healthcare system.

Despite Challenges, Massachusetts Still Has Nation’s Best Health System

As seen in the recent Division of Insurance hearing about insurance hikes, the legislature’s effort to resolve aspects of hospital finances, and the severe blow the U.S. Senate struck last week against Medicaid (see related stories), the state’s healthcare system is reeling. But in the most recent national ranking from the respected Commonwealth Fund, Massachusetts has the best healthcare system in the nation.

After applying 50 measures to gauge a health system’s access and affordability, prevention and treatment, avoidable hospital use and costs, health outcomes and healthy behaviors, and equity, the Commonwealth Fund placed Massachusetts at the top of the list. Hawaii, New Hampshire, Rhode Island, and the District of Columbia were next, while West Virginia, Arkansas, Oklahoma, Texas, and Mississippi brought up the rear.

According to the Commonwealth Fund rankings, if you live in Massachusetts you are most likely insured, your children have all of their vaccines, and the chances of you or your family avoiding colorectal or breast cancer, death by firearm, or infant mortality are better here than in any other state. The commonwealth’s medical infrastructure has always placed it at the top of quality-of-care lists, but more surprisingly is the fact that Massachusetts ranks near the top (6th) in keeping out of-pocket medical costs low relative to the patient’s annual household income. That is, the dollar cost of a procedure may be high in the state but not as a percentage of household income.

Hospital use, however, is high in Massachusetts, according to the latest available numbers (2023). Elderly people in the state (over age 65) also use Massachusetts EDs more than other states.

“As the debate over healthcare costs and access continue in Massachusetts, it’s important to keep in mind what we’re fighting for – a healthcare infrastructure that is the crown jewel of the commonwealth and the nation,” said Steve Walsh, the president and CEO of MHA. “Students from around the U.S. travel here to be educated at our medical schools, and patients from across the globe come to Massachusetts to access our hospitals. Massachusetts hospitals and health systems are usually the largest employers in their service areas and the economic multiplier effect from their presence in the state is profound. Preserving that excellence while improving its availability to all in our state must be the driving force behind every policy decision we make as a commonwealth.”

Senate Passes Supplemental Budget

The Massachusetts State Senate last Wednesday, by a vote of 38-2, passed a $532 million supplemental spending bill that devotes $174 million to fiscally strained hospitals and $35 million to struggling community health centers.

The money would be distributed to hospitals through a tiered payment structure based on the facility’s payer mix and operating margins.

“This hospital strategy recognizes that the current health safety net funding scheme is ineffective from both a resource and payment perspective,” said Senate Ways & Means Chair Michael Rodrigues (D-Westport) from the Senate floor on Wednesday. “To ensure we strive to meet the fiscal needs of healthcare providers confronting so much federal uncertainty, we also call for a task force to study the sustainability and resources of the health safety net to create a better system for hospitals statewide.”

The Health Safety Net will incur a shortfall of $250 million this fiscal year, meaning that hospitals will have to absorb that bad debt after providing care to the uninsured and underinsured in the state. MHA expressed gratitude to the Senate for its action in helping to ease that burden while noting that not all hospitals that pay into the Health Safety Net this year will receive funding back from it under the Senate’s supp budget. The House, in its version of the state budget, included $230 million in outright Health Safety Net relief.

Judge in U.S. District Court Halts NIH Cuts

A judge in the U.S. District Court in Massachusetts last week ruled that the some of the Trump administration’s cancellation of grants from the National Institutes of Health were “illegal” and an example of governmental “racial discrimination.”

Judge William Young, who was appointed to the court by President Ronald Reagan, declared the grant terminations void and ordered that the funds be made available immediately. The administration said last week it was considering its options, including an appeal of the ruling.

At issue are more than 800 grants that the NIH rescinded because, according to letters sent explaining the cuts, the government no longer prioritizes the subjects of the grants. According to the termination letters, the targeted grants focused on “DEI,” “transgender issues,” “vaccine hesitancy,” and other items the Trump administration has targeted through its executive orders and directives.

A group of researchers, the ACLU, the Center for Public Research, and others brought suit against the cuts in April, as did the Commonwealth of Massachusetts joined by other 15 other states.

According to reporting from the Boston Globe and the New York Times, Judge young was especially critical of the administration’s declaration that DEI-related research supports “unlawful discrimination.”

“Where’s the support for that? Any support? Any rational explanation?” Young is reported to have said at the hearing. “I see no evidence of that. Point me to … any particular grant or group of grants being used to support unlawful discrimination on the basis of race. From what I can see, it’s the reverse.” Later he said, “I am hesitant to draw this conclusion — but I have an unflinching obligation to draw it — that this represents racial discrimination and discrimination against America’s LGBTQ community. That’s what this is. I would be blind not to call it out. My duty is to call it out.”

U.S. Supreme Court Says Tennessee Can Ban Gender-Affirming Care

The U.S. Supreme Court ruled last Wednesday to uphold a Tennessee law prohibiting the use of puberty blockers or hormones on anyone under age 18 to enable the minor to “identify with, or live as, a purported identity inconsistent with the minor’s biological sex,” or to treat the distress such people feel from the conflict between their biological sex and asserted identity.

Three minors, their parent, and a doctor had contested the law, arguing that it violated the U.S. Constitution’s Equal Protection Clause – that is, similarly situated people deserve the same protection under the law. Tennessee law bans the use of puberty blockers and hormones for transgender youth, but allows their use in others use for different purposes.

The court’s decision does not affect states such as Massachusetts that do not ban gender-affirming care, but does set a precedent of sorts for the 27 states across the U.S. that have such bans in place. The Supreme Court decision, however, was narrowly focused on the equal protection issue, while bans in some other states are being challenged in the courts on the basis of other legal issues. Elements of the reconciliation bill now being debated in Congress would ban the use of Medicaid funds for gender-affirming care

In the Massachusetts Senate’s supplemental budget passed last week (see story above), the chamber approved an amendment allowing pharmacies to distribute pharmaceuticals for gender-affirming care during declared public health emergencies. As reported in State House News, the sponsor of that amendment, Julian Cyr (D-Truro), cited the Supreme Court decision, adding, “Gender-affirming care medications are being banned in states across the country. These are the same medications trans people rely on to live safely and authentically. Just as mifepristone became the next target after [the court overturned] Roe [v. Wade], gender-affirming medications will be the next to come.”

John LoDico, Editor