Financing

Financing is the greatest challenge in accomplishing any state or national health system reform initiative. Many reform proposals are developed, but, because of financing issues, few are implemented. Proposals must surmount ideological differences about the roles of government and the private sector, which often determine the methods and sources of financing.

To help overcome these barriers, reform efforts often require funding from multiple sources. Reform efforts rely to a significant degree on identifying and obtaining both federal funding sources and state funding sources, both of which are areas of expertise of our staff at the Center for Health Law and Economics at UMass Medical School.

Federal Funding Sources

Federal funding is critical for health care reform proposals and initiatives at the federal level, but it is just as important for the success of state health care reform initiatives. The Center for Health Law and Economics at UMass Medical School has extensive knowledge and expertise around optimizing the use of federal financing to support state reforms. This expertise includes decades of service in executive and senior roles in Massachusetts’ Medicaid program with direct responsibility for managing the federal Medicaid relationship and overseeing all waiver programs.

Whether states are seeking to reform their acute-health or long-term care financing or delivery systems, federal Medicaid and Children’s Health Insurance Program (CHIP) funding is a vital financing source to supplement state and other non-federal financial investments. These federal funds flow to states through the Medicaid and CHIP state plan process, as well as through Medicaid and CHIP waivers.

While Medicaid is the primary payer of both community-based and institutional long-term care services, other federal funding sources also can be tapped to support long-term care system reforms. These include federal grants from the Older Americans Act (Title V of the Social Security Act) and related programs for providing or supporting community-based long-term care services for elders and people with disabilities.

State Funding Sources

State financing for health care reform efforts can come from a variety of sources, and the staff of the Center for Health Law and Economics at UMass Medical School has comprehensive knowledge to evaluate the best options for our clients.

We have extensive knowledge of and expertise in navigating the complex rules around state and federal financing options for state and national health reform efforts. This expertise includes decades of service in executive and senior roles in Massachusetts’ Medicaid program with direct responsibility for the following:

  • Managing the federal Medicaid relationship
  • Advising state health officials on the legal and policy implications of employing one financing source over another
  • Developing innovative financing strategies to support and sustain health care reform initiatives

State funding is typically used to draw down federal Medicaid financial support. Federal Medicaid rules define the permissible sources of financing that states can use as the “non-federal” share of Medicaid expenditures to draw down the federal Medicaid dollars. These sources include:

  • Appropriations from a state’s general fund
  • Taxes on certain classes of health care providers, such as hospitals and nursing facilities (“permissible provider taxes”)
  • Transfers of dollars from county, municipal or other units of government (“intergovernmental transfers” or “IGTs”)
  • Certified Medicaid expenditures incurred by a unit of government or publicly-owned and operated health care provider (“certified public expenditures” or “CPEs”)

In addition to funding the state share of Medicaid expenditures, states also may fully fund some aspects of health reform with new or redirected state monies. State-only funds are required when the uses of the funds are not eligible for federal Medicaid matching funds or for reform components outside of the Medicaid program. The sources for doing so can vary from general state revenues to dedicated revenue sources, such as taxes on tobacco products.