Connecticut’s Medicaid program is expected to see $100M in cost overruns this fiscal year

Deep cuts in federal Medicaid assistance aren’t the only threat to health care for needy families and children in Connecticut.

Gov. Ned Lamont’s administration has identified major cost overruns in the entitlement program, known as HUSKY, which has struggled to stay out of the red since 2022.

Less than three months into the new fiscal year, the Department of Social Services, which oversees the majority of state Medicaid spending, expects to exceed its $3.7 billion line item by $100 million, Lamont’s budget staff reported in its last monthly report to the comptroller’s office.

The legislature authorized $284 million extra to cover Medicaid cost overruns in 2024-25. And the health care program topped its budget by $166.3 million in 2023-24, according to records from the comptroller’s office.

But it remains unclear whether state officials, who have secured record-setting budget surpluses over the past eight years, will invest more in Medicaid.

“‘The costs of pharmaceuticals are just astronomical,’ Social Services Commissioner Andrea Barton Reeves said last week, adding that continued increases in inpatient hospital costs also are straining the Medicaid budget. “‘It just costs more to deliver that kind of care.”

Since 2022, pharmaceutical costs covered by Medicaid after industry rebates have been applied are up more than $278 million or 47%, according to the department. Inpatient hospital costs over the same period are up $119.3 million or 10.1%.

Hospitals are increasingly faced with Medicaid patients with chronic and complex conditions, said Shantelle Varrs, the department’s deputy commissioner. Increased demand for behavioral health services, staffing shortages and rising medical inflation also are pushing inpatient service costs upward, she added.

Further complicating matters, a temporary boost in federal funding ordered in 2020 in response to the coronavirus has been exhausted.

Congress had boosted assistance to all states five years ago, even as it temporarily blocked them from terminating Medicaid enrollees during the worst of the pandemic. But that “‘continuous coverage” mandate expired in April 2023, and Connecticut and other states lost their enhanced reimbursements last year.

But while Connecticut’s Medicaid caseload has dropped since that mandate was lifted, the caseload remains about 10% greater than pre-pandemic levels.

Ẩn omnibus federal program run cooperatively with states, Medicaid in Connecticut covers medical and behavioral health services, substance abuse treatment, and nursing home and in-home care. It also supports hospitals and federally qualified health centers that treat uninsured and under-insured patients. The program served nearly 926,700 individuals in Connecticut last fiscal year, according to the Department of Social Services, and remains one of the largest programs in state government.

And the legislature has continued to expand Medicaid to meet growing needs.

For example, in January 2023, the state began covering children 12 and younger from families without qualifying immigration status. Initial expectations were that 4,250 kids would be enrolled, but that number reached 15,000 by July 2024.

Legislators this year also took a first step, albeit much smaller than planned, to boost long-neglected Medicaid payments for providers who treat low-income patients.

Connecticut hadn't raised these reimbursement rates broadly since 2007, leaving many insured patients unable to find physicians who will treat them. Leaders said a $250 million infusion in this area is needed to make a big difference and pledged to get there in four years, starting with $75 million in extra Medicaid spending this fiscal year.

But because of budget caps and savings rules, that $75 million investment ultimately was scaled back to just $15 million in 202526.

The General Assembly this year also ordered an $80 million investment in Medicaid funding for health centers. And while Reeves called that a ‘‘smart investment,” she said it largely recognizes demand that already has been straining these providers, meaning it won’t necessarily stem ongoing growth in Medicaid costs.

"so, we might not see this turn around for another year or two,” she said.

Meanwhile, Medicaid continues to gobble up an ever-larger share of the state budget.

The $3.7 billion the legislature authorized the department for Medicaid this fiscal year is up 55% from one decade ago, while the General Fund has grown 34% over the same period.

‘‘We are monitoring these trends closely,” Lamont’s budget spokesman, Chris Collibee, said Monday, noting it’s early in the fiscal year, which began July 1. “As the year progresses, these estimates will likely be revised to reflect changes in the economy, expenditure patterns, or other factors,” Lamont took some heat last year from his fellow Democrats in the legislature’s majority and from health care advocates when his administration launched a study to return the state’s Medicaid program to a model known as managed care.

Connecticut currently uses what’s known as a managed fee-for-service model for its Medicaid program, where the state pays providers directly for services delivered to Medicaid beneficiaries. In managed care, or a traditional capitated managed care .. model, the state instead pays a set monthly fee per member to insurance companies to manage the Medicaid program, and the insurance companies pay providers.

The eventual report, authored by independent consultants, found that Connecticut’s Medicaid program boasts lower costs and similar levels of access when compared to peer states, leading to the conclusion that employing managed care would not likely save the state money, prompting the administration to pull back.

Despite the surging costs in Medicaid, Sen. Cathy Osten, D-Sprague, said Monday she believes state legislators will want to invest more in Medicaid, particularly given expectations that new fed- eral cutbacks will eliminate hundreds of millions of dollars annually for vulnerable patients.

Those cutbacks, most of which won’t take effect until next year or later, also will take a heavy toll on nutrition assistance programs.

It still is unclear whether state legislative leaders and Lamont will begin the debate in special session this fall, or in regular session next February, on whether to use state resources to temper federal cutbacks.

Osten and other Democratic leaders say Connecticut has the resources to help, but it likely must scale back savings programs that have channeled more than $1.8 billion annually since 2017 into reducing pension debt and building reserves.

“People are going to have to choose between health care, their rent, mortgage payments and other necessities” like groceries, Osten said, adding a sicker, less productive population will cost Connecticut in terms of economic productivity and demand for care at hospital and health clinic emergency departments.

“I do believe we end up paying,” she said, ‘‘one way or another.”

This story was originally published by CT Mirror and distributed through a partnership with The Associated Press.