Revenue impact of federal health care changes loom

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While a final health care bill has yet to emerge in Washington, D.C., both the House and Senate proposals to repeal and replace the Affordable Care Act (aka “Obamacare”) would significantly alter the annual budget calculus on Beacon Hill.
 
Under current law, Massachusetts receives an uncapped subsidy of more than $500 million per year to cover childless, low-income adults on Medicaid. House and Senate proposals would eliminate this subsidy and place per capita caps on spending. States that spend above the per capita cap would not be reimbursed, but there would be no shared savings if states beat their spending targets.
 
Subsidies for the MassHealth Connector would be reduced by more than $200 million. Advanced premium tax credits, designed to help offset high monthly premium costs, would be replaced by age-based refundable tax credits.
 
Altogether, the proposed policy changes and reduced federal funding coming into Massachusetts would create a hole exceeding $1 billion in the Commonwealth’s budget beginning in fiscal 2020. The governor and Legislature were expected to come to agreements shortly for closing out fiscal 2017 and budgeting for fiscal 2018, but it appears that the Commonwealth’s fiscal woes won’t end by Labor Day.