CT Projects $210M Medicaid Cost Overruns, Challenging Spending

Just two months into the new fiscal year, Connecticut’s Medicaid program is facing $210 million in projected cost overruns, creating new challenges for lawmakers hoping to spend even more next year to boost payments to doctors who treat low-income patients.

Demand is up for hospital outpatient, clinic and pharmacy services, Governor Ned Lamont’s budget office recently reported in its latest monthly fiscal update to the state comptroller’s office.

Chris Collibee, spokesman for the state Office of Policy and Management, said, “We continue to see significant growth in Medicaid program costs driven by higher enrollment / utilization and program expansions.” Collibee continued, “The administration will be closely monitoring Medicaid costs throughout the fiscal year and will take appropriate action as necessary.”

But the cost overrun forecast does not come as a surprise to all officials, given that the General Assembly ignored warnings last spring that the program needed far more dollars than they planned to budget.

Lamont recommended last February that legislators approve a nearly $3.4 billion Medicaid account for the state Department of Social Services in the 2024-25 fiscal year, up about $200 million from what lawmakers had approved in 2023-24. And some legislators weren’t sure that was sufficient.

Medicaid, a federal health care program run cooperatively with states, already was facing $165 million in cost overruns last April with just two months left in the 2023-24 fiscal year.

But the Democrat-controlled General Assembly opted not to adjust a preliminary $26 billion state budget it had approved for 2024-25, declining to add extra funds not only for Medicaid, but for other problems Lamont had identified, including required pension contributions.

Had Democrats plugged these gaps, the state’s spending cap and other budget controls would have blocked other initiatives, chiefly boosting funds for higher education, social services and childcare.

That $26 billion budget was drafted with a built-in surplus of almost $300 million. But according to the Lamont administration, the Medicaid, pension and other problem areas already have whittled that cushion down to $113 million — a margin equal to one-half of 1% of the General Fund — since the fiscal year began on July 1.

The new Medicaid shortfall “is very frustrating and disappointing,” House Minority Leader Vincent J. Candelora, R-North Branford, said, not only because Democrats “allowed for all of these holes” but also because they are hoping to boost Medicaid spending further when the next legislative session starts in January. “You can’t have it both ways.”

The Lamont administration and the legislature are amid a two-year effort to evaluate the Medicaid reimbursement rates Connecticut pays doctors and other health care providers who treat low-income patients. The last broad-based rate adjustment was ordered in 2007.

A 2019 analysis by KFF, the health care think tank formerly known as Kaiser Family Foundation, found that Connecticut’s Medicaid rates for primary care doctors’ services ranked 22 among all states.

Connecticut ranked 30 for rates paid to obstetricians and 42 for those covering other services.

Some legislative leaders fear huge numbers of Connecticut residents who receive state-sponsored coverage through HUSKY A, which is part of the Medicaid program, are insured in name only. In other words, they either can’t find a doctor willing to treat them or must wait dangerously long to see one of the few providers still accepting Medicaid patients.

Rep Toni E. Walker, D-New Haven, co-chairwoman of the Appropriations Committee, said, “People have to wait six and 12 months to get a provider.”

And Sen Cathy Osten, D-Sprague, the panel’s other co-chair, said, “we’re at that tipping point where not doing rate increases will impact us.”

Sen Saud Anwar, D-South Windsor, a physician and co-chairman of the Public Health Committee, said, “Medicaid is part of our safety net.” Anwar added, “If we do not have Medicaid supported, the health and well-being of the entire [health care] infrastructure would be devastated.”

The Lamont administration has been researching whether Connecticut should return its Medicaid program to the managed care model it used prior to 2010.

The state currently uses a managed fee-for-service system that pays providers directly for treatments made to patients. In a “capitated managed care” model, the state instead pays a set monthly fee per patient to insurance companies to manage the Medicaid program, and the insurance companies pay providers.

This helps states predict and control costs. But when Connecticut last used the program, critics said it led to poor quality of care.

Some of Lamont’s fellow Democrats in the legislature predict there is no appetite to return to managed care.

Walker called the pre-2010 Medicaid program “a fiasco that caused irreparable harm to the families we covered.”