BCBSMA Foundation Report Highlights Impact of ‘Provider Tax’ on MassHealth Program
The Blue Cross Blue Shield of Massachusetts Foundation today released a new analysis of “provider tax” assessments that serve as a critical source of revenue for MassHealth, the publicly funded health insurance program that provides coverage to millions of Massachusetts low-income residents.
Provider taxes are assessed on certain health care providers, such as hospitals, nursing homes, and managed care organizations. When the state invests the revenues from those taxes into MassHealth, they draw added federal revenue that also gets returned to MassHealth and invested back into the health care system. Provider taxes are one tool available to states to help finance health coverage for low-income people. Every state but Alaska uses provider taxes to support the state share of Medicaid spending.
In fiscal 2025, the state is projected to generate approximately $2.3 billion in revenue from provider tax assessments. Factoring in the federal share for Medicaid-related expenses, the value totals $4.3 billion.
The Foundation’s report was released as Congress and the new Administration are proposing various ways to reduce federal spending on Medicaid, including by imposing new restrictions on provider taxes and the federal reimbursements they generate. The House Energy and Commerce Committee passed a budget bill on Wednesday that would establish a moratorium on future new or increased provider taxes and would prohibit certain existing provider taxes. MassHealth officials have stated that the bill as drafted would require Massachusetts to cease collecting one of the four provider taxes it currently has in place (its managed care organization assessment), leading to a loss of $625 million in revenue per year.
The report does not provide an analysis of specific proposals being considered but it explains how provider taxes work and the role they play in helping to finance MassHealth, the name for Massachusetts’ Medicaid and Children’s Health Insurance (CHIP) programs. MassHealth is
jointly funded by the federal government and states. Most of what the state spends on MassHealth is eligible for at least 50% reimbursement by the federal government, meaning the net cost to the state for running the program is about half of the total cost.
Federal action to restrict provider tax eligibility for federal Medicaid reimbursement would mean that states like Massachusetts would have to make up any lost revenue out of their own general funds – or make cuts to their Medicaid programs.
“Imposing new restrictions on provider taxes and the federal reimbursement that they generate would drastically impact the MassHealth program,” said Audrey Shelto, President and CEO of the Blue Cross Blue Shield of Massachusetts Foundation. “This is not merely about changes to the rules governing these assessments. This will have real world consequences for low-income people in Massachusetts, providers, and the broader – already strained – health care system.”
MassHealth currently provides health care to 2 million – over 1 in 4 – Massachusetts residents, including children in low-income households, low-wage workers, older adults in nursing homes, people with disabilities, and others with very low incomes. The program plays an essential part in the state’s high rate of health insurance coverage – more than 98% of Massachusetts residents have coverage.
The report – titled What Is the Role of Provider Taxes in the MassHealth Program? – is available online at the following link: https://www.bluecrossmafoundation.org/publication/what-role-provider-taxes-masshealth-program
About the Blue Cross Blue Shield of Massachusetts Foundation
The mission of the Blue Cross Blue Shield of Massachusetts Foundation is to ensure equitable access to health care for all those in the Commonwealth who are economically, racially, culturally or socially marginalized. The Foundation was established in 2001 with an initial endowment from Blue Cross Blue Shield of Massachusetts. It operates separately from the company and is governed by its own Board of Directors. For more information, visit www.bluecrossmafoundation.org.
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