Explaining Medicaid, Connecticut's HUSKY program and what's next

Jul. 5—Medicaid has been a hot topic for many this past year, but explaining the program isn't as simple or as conversation-inspiring.

The Republican tax and spending cut bill that made its way through Congress this past week will bring significant cuts to the Medicaid program, leaving millions to worry about the future of their health care. Many adults will now be required to work 80 hours per month in order to enroll in Medicaid, along with a proposed $35 co-payment that can be charged.

The Congressional Budget Office estimates 11.8 million Americans would become uninsured by 2034 under the bill.

Here is a guide on how Medicaid currently works in Connecticut.

When did Medicaid start?

Medicaid has roots dating back to 1965 when U.S. lawmakers amended and passed Title XIX of the Social Security Act to establish the program. The idea was for the federal government to allocate some funds that states could invest locally to provide health coverage to low-income residents.

The Centers for Medicare and Medicaid Services administers and oversees the states' programs if states choose to opt in. State governments can seek additional waivers to experiment and implement initiatives beyond the required federal statute if it advances their program.

Although there are certain federally required services that Medicaid providers must meet, each state establishes and administers its own policies for the program. As a result, the amount spent, eligibility rules, and covered services vary across state lines and programs.

The introduction of the 2010 Affordable Care Act significantly altered the system by offering an optional program to provide states with extra funds to expand their Medicaid population coverage. The decision to expand Medicaid resulted in a significant reduction in the number of uninsured people in Connecticut and nationwide, according to recent data from the Commonwealth Fund, a nonprofit health think tank.

In total, Medicaid currently helps provide coverage to medical services for 83 million people nationwide. The federal government reimburses the states for at least 50% of total costs.

The federal share for Connecticut's Medicaid spending has been steadily increasing over the years, from 55% in 2014 to 68% in 2022, some of which can be attributed to COVID-19 pandemic expansions, according to CT Health Policy Project.

More recently, Connecticut received about $6.6 billion through the federal match during fiscal year 2024.

What is HUSKY Health?

Medicaid is more commonly known as HUSKY Health in Connecticut. Eligibility into one of the four programs heavily relies on income and other outlined requirements:

* HUSKY A is a program for children and their families whose household income is less than 185% of the federal poverty level. Pregnant individuals with incomes below 250% of the federal poverty level are also eligible.

* HUSKY B is Connecticut's Children's Health Insurance Program. It lets uninsured children under 19 years old in low-income households that do not meet HUSKY A eligibility still receive state coverage. The HUSKY B program requires payment of monthly premiums and cost-sharing. Unlike other free programs, cost-sharing and premiums may be applied based on income level.

* HUSKY C covers individuals who are disabled, blind and elderly. However, income and asset eligibility varies by which part of HUSKY C a person qualifies for. For example, employees with disabilities can access state coverage through MED-Connect, which has higher income limits.

* HUSKY D covers the expanded population created by the 2010 Affordable Care Act. It encompasses adults under 65 who don't fall into another eligibility category, don't receive Medicare, have household incomes below 133% of the federal poverty level, plus a 5% income disregard, or approximately $1,732 per month, with no asset limits.

* Residents who don't qualify for full HUSKY benefits can still apply to specialized programs that allow them to cover certain services with Medicaid, such as limited family planning, emergency care, outpatient dialysis, and tuberculosis evaluation and treatment.

HUSKY Health covers a wide range of services across its programs, including, but not limited to, preventive care, hospice care, vision care, dental care, mental health services, and substance use treatment. It has evolved over the years to provide more patient-focused and community-based access to care, including services such as doulas and community health workers.

Not all providers accept Medicaid. Most individual medical physicians can choose whether to accept Medicaid and what percentage of their practice it will comprise, said Mark Schaefer, vice president of system innovation and financing at the Connecticut Hospital Association. Due to historically low reimbursement rates for specialty care, there's less incentive to accept state insurance, thus limiting access to care.

Schaefer said hospitals, safety-net providers and federally qualified health centers are federally required not to turn anyone away. As a result, their Medicaid population and fiscal dependency vary by community and ZIP code.

Who is covered by HUSKY?

It's safe to say that there's a Medicaid recipient in every corner of Connecticut, said Tiffany Donelson, president and CEO of Connecticut Health Foundation.

Since 2012, the number of people enrolled in the program has been steadily increasing, reaching a high of 1.2 million Connecticut residents in recent years, due to federal expansions during the COVID-19 pandemic. Connecticut is also one of a handful of states that have incrementally increased access to HUSKY Health coverage for particular income-eligible residents regardless of their immigration status.

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Despite the steady rise in enrollment across the HUSKY programs over the year, state data shows a decline in enrollment this year — an expected effect caused by the unwinding of federal COVID-19 Medicaid expansions. A spokesperson for the state Department of Social Services stated that there are 917,000 residents enrolled in all HUSKY Health programs, a decrease from last year.

Of the currently enrolled population in Connecticut, KFF, an independent source of health policy research formerly known as the Kaiser Family Foundation, estimates that 68% are nursing home residents, 49% are working-age adults with disabilities, and 38% are children.

Donelson said people of color in Connecticut typically report higher rates of health conditions and complications, like uncontrolled diabetes, asthma and hypertension, due to a historical lack of investment in these communities.

The HUSKY program, Donelson said, is the first step for communities to access the care system and ultimately addressing the disparities. The Connecticut Health Foundation found, for example, that by 2016, the creation of HUSKY D had helped more people manage their diabetes and blood glucose levels than ever before.

"We know that if an individual is continuously covered by insurance, that is one mechanism for reducing disparities because it gives individuals access to the healthcare services that they need," she said. "I'm not saying that it's perfect, but it allows them the ability to gain access to our system, especially for important things."

Medicaid is the largest payer of long-term care in Connecticut, covering residents in nursing homes and those receiving home health care, surpassing even Medicare, according to the state.

HUSKY Health covers 44% of all births in the state. It also supports local school districts in providing special education services, bringing in over $20 million in federal dollars and serving 28,000 public school students. Donelson added that research shows Medicaid coverage in childhood increases their chances of growing up to be a healthier adult.

Having broad access to Medicaid also ensures a healthier overall workforce. Donelson said that over 65% of those who rely on HUSKY Health are working jobs, such as child care providers and food service workers, but were unable to access employer-based insurance.

How is HUSKY funded?

Health experts said Connecticut has some of the most expansive eligibility rules and services covered when compared to other states; however, that doesn't mean the system is perfect.

Initially, the state relied on three private managed care plans that would set fees for providers, with the revenues to be used for paying medical claims.

In 2012, Gov. Dannel Malloy's administration decided to move the state away from the managed care plan and implement an administrative services organization model. The goal of the new model was to transition Medicaid providers into a self-insured system, where the state pays medical claims while an organization administers services. The hope was to reduce costs and promote care coordination.

The state also began paying certified patient-centered medical home practices at higher rates, a care model in which a patient's treatment is coordinated through their primary care physician and care team.

Despite some initial bumps, the Connecticut Health Policy Project found that the state has saved billions of tax dollars while improving the quality of care, access, and delivery of preventive care, as well as patient satisfaction, since the change.

Providers accepting Medicaid are paid for each service they provide. Payment rates to providers in Connecticut Medicaid are above the U.S. average but very low when compared to other comparable states.

However, for years, medical providers across the health care field have raised concerns that the reimbursement rate is insufficient to sustain the programs, leading to closures. Yet, Connecticut's Medicaid costs have grown more slowly than other fiscal endeavors, such as the general fund, according to the CT Health Policy Project. In 2022, for example, HUSKY cost the state $7.9 billion. The state's share was $2.5 billion, or 32%, while the federal government paid most of the costs, at $5.3 billion, or 68%.

What is the hospital tax?

In Connecticut, hospitals are the largest consumers of Medicaid spending; however, they also help fund a portion of the state's share through a statewide hospital tax.

The system was created in 2012 with the idea of taxing hospitals collectively $300 million, who would then receive a reimbursement of $350 million from the state for services, providing some net benefit to hospitals, Schaefer said.

Other states similarly use a tax program on hospitals and nursing homes to recoup the funds as a larger re-investment through rate increases and supplemental payments as reimbursement add-ons. Yet, Schaefer said the hospital tax in Connecticut was among the highest in the country when it was initially set and later increased, but it hasn't had the same return on investment.

Under the Malloy administration, Schaefer stated that a $900 million tax increase occurred in 2019; however, the return for hospitals was closer to $600 million, resulting in a net loss and underpayment.

The tax increase was coupled with changes to the payment model for hospitals. Schaeffer said the state transitioned from paying hospitals by case rates to a payment model focused on diagnostic-related groups and advanced care planning services. Similar to the Medicare payment models, this approach pays based on the severity and acuity of care, as determined by the diagnosis, while also incentivizing better quality care.

A diagnosis of appendicitis and treatment with an appendectomy, for example, is associated with a certain length of stay and cost depending on severity and complications. If a patient has other chronic conditions that complicate care, such as diabetes, Schaefer said the payment may be adjusted.

Following slow fiscal growth due to the tax increase without a corresponding return on investment, Connecticut hospitals pursued legal action against the state in 2019. It ended in a settlement agreement intended to help hospitals break even and return to a net benefit, including a 2% rate increase each year, set to expire in mid-2027.

The settlement was a significant boost for hospitals to return to a break-even point, but it also coincided with the COVID-19 pandemic, during which operation costs skyrocketed.

With the settlement's end on the horizon, many hospital experts are uncertain heading into the future. The most recent state budget, signed into law by Gov. Ned Lamont, also included an increase in the hospital tax, frustrating many hospital leaders.

For inpatient services, the bill resets the inpatient rate at 6% of each hospital's audited net revenue for the applicable federal fiscal year. The outpatient provider tax would be increased to $1.195 billion, minus the total tax imposed on all hospitals for providing inpatient services, divided by the total audited net revenue for the applicable federal fiscal year attributable to outpatient hospital services of all hospitals required to pay the tax.

Both taxes take effect on July 1, 2026, marking a $375 million increase with the eventual goal of increasing reimbursement rates for hospitals. However, hospital leaders say the tax increase will ultimately harm the health network, its workforce, and patients. It also doesn't address the ongoing Medicaid funding shortfall.

What is the impact of underpayment at hospitals?

For a single-hospital, independent health system in lower Fairfield county, Stamford Health encounters around 520,000 Medicaid patients, making up about 8.5% of the revenue or $69 million, said Ben Wade, senior vice president of strategy and marketing and chief strategy officer.

The nonprofit hospital operates on a thin margin for several reasons, but one of the major drivers is Medicaid underpayment.

Wade said Stamford Health receives, on average, 60 cents for every dollar spent on services through Medicaid.

Wade said the health network relies on negotiations with commercial insurance companies in order to have a "very, very modest bottom line." Ultimately, underpaying for either Medicare or Medicaid, he said, leads to hospitals increasing the rates above the cost of care for commercial insurance, thus paying more than the cost of care.

"We're at a place where things are very lopsided. This isn't just at Stamford Health. This is true for hospitals and health systems across the country, what's called the cost shift," Wade said. "So now people who have commercial insurance is basically bearing the cost of the underpayment for Medicare/Medicaid, and for those who are uninsured entirely."

Even with the settlement agreement, Wade said it's taken Stamford Health more than four years to break even. He added that there's a lot of uncertainty moving forward, considering the state legislatures increased hospital taxes without a commitment to also raise their Medicaid reimbursement.

At Trinity Health of New England, approximately 80% of their patients receive coverage through Medicare or Medicaid, making the federal programs a significant part of their financial operations, said Dan Keenan, regional vice president of advocacy and government relations.

He estimates that Medicaid pays the hospital network about 65 cents for every dollar spent on services, while Medicare pays around 80 cents to the dollar. Keenan said the reimbursement for services is not keeping pace with the actual cost of providing care, driven by workforce shortages, prescription drug costs, and supply chain costs. Across all its hospitals, there's an over $1.4 billion shortfall between the cost to provide care and reimbursement for Medicaid.

At the same time, Trinity Health pays approximately $87 million in hospital taxes to the state and receives a refund of $48 million.

How does Medicaid pay federally qualified health centers?

One of the biggest HUSKY providers are federally qualified health centers, serving an estimated 25% of the state's Medicaid population, said Shawn Frick, chief executive officer for the Community Health Center Association of Connecticut. However, they have a different payment model for hospitals and private providers.

Federally qualified health centers, also known as community health centers, are created through federal grants to care for the uninsured and underinsured. Since 1999, health centers nationwide have been paid based on a predetermined, fixed amount under a prospective payment system implemented by the U.S. Congress and phased into Connecticut's Medicaid program in 2001.

In Connecticut, the health centers serve around 440,000 patients, 60% of which are on Medicaid, thus making up a significant portion of its payers. Although it was a fixed amount, Frick said the payment system is designed to account for rising operational costs, such as increasing labor salaries, medications, and overall inflation.

Connecticut community health centers had some of the lowest paid rates by "significant margins" compared to other states in the U.S., with several research studies confirming this, Frick said. It currently covers about 60% of the cost of care,

Thanks to a "long-time coming" agreement, Frick said health centers statewide will see reimbursement rates increase by $80 million or 40% from the current rate over the next three years. The goal is to get the reimbursement rates for health centers to cover the full cost of care, providing the much-needed increase that providers have been asking for through a mix of state and federal funds.

In addition to the health centers, the new state budget allocates over $176 million over the next two years to support a 3% increase for providers, plus an additional $30 million specifically for non-DDS providers, Lamont's office recently announced. There's also an additional $100.1 million to support the group home settlement, representing a 15% increase.

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