Medicaid funding stirs debate

Your dad in a nursing home may depend on it, along with your blind neighbor and the kids from the low-income family down the street.

Medicaid, the government program that covers health care for nearly a million Connecticut residents, has become a focus of controversy both in Hartford and Washington, D.C., this winter as costs continue to grow.

Care for Medicaid patients cost $9.8 billion in Connecticut in 2024, according to health data site KFF, with the federal government paying for about half of that total and the state covering the rest. In our state, the Medicaid program covers 1 in 5 adults aged 19-64, and 3 in 8 children along with 2 of 3 nursing home residents and 2 of 5 people with disabilities.

The bill may be big, but Connecticut stands out in the region for its cost-effective use of Medicaid funds, according to an independent analysis released late last year. The state's per-capita Medicaid spending is 14% lower than the average of most Northeastern states, with administrative costs markedly lower than states that use a managed-care model to fund Medicaid (3.8% vs. 9.4%).

"I want Connecticut to be doing everything we can to ensure that our residents who rely on Medicaid are receiving access to high-quality, equitable care, and that we are using these federal dollars most efficiently," Gov. Ned Lamont said in December at the time of the report's release.

Seeking to improve that efficiency, Lamont proposed changes in his 2025 budget that would save the state $150 million by shifting some Medicaid costs to hospitals. "Just as we are bending the curve on pensions and bonded debt, health care costs are consuming our budget, especially Medicaid and pharma," he said.

"Our budget includes some initiatives that will drive the lobbyists crazy," Lamont added. "Ask them if they have a better idea."

CT hospitals dispute funding plan

Lamont's proposals, along with a recent change in the state's Medicaid funding formula, seem to be driving Connecticut's 27 acute-care hospitals crazy, judging by statements from the Connecticut Hospital Association.

"Gov. Lamont's budget proposal contains policies that are devastating to hospitals, their workforce and their patients," CEO Jennifer Jackson said on Feb. 5. "These proposals will add significant financial burdens on local hospitals at a time when they are already struggling."

At issue are Lamont's proposals linked to a new formula on determining how much hospitals are reimbursed for providing care to patients covered by Medicaid.

Regulators from the state's Office of Health Strategy, Department of Social Services and Office of Policy and Management sat down last year to look at the reason why an ever-larger share of Medicaid funding went to hospitals every year while the hospitals continued to claim underpayment, OHS Commissioner Deidre Gifford said in a Feb. 7 interview.

Medicaid costs for hospital care in Connecticut have been rising at a much higher rate than spending for physician, dental, clinic or pharmacy services, according to a 2023 report by the Connecticut Health Policy Project, a consumer advocacy organization.

"Make sure that we're counting everything accurately," Gifford said, describing the the regulators' mission. It turned out that Connecticut, unlike neighboring states, was not accounting for all of Medicaid revenue going to hospitals.

"We cleaned that up, and we said all of your payments for Medicaid need to be counted as Medicaid revenue," Gifford said. Hospitals agreed to the changes, but balked when OHS decided to change its formula on accounting for the state's provider tax.

Although all but three hospitals in Connecticut are nonprofit, the state is allowed to charge a "user fee" or provider tax based on a hospital's total revenue. That user fee earned the state a total of $839.6 million in fiscal 2023, according to the OHS. For this year, the regulatory agency changed its formula for how hospitals can use their user fee payments to offset Medicaid revenue.

Under the previous formula, for example, a hospital that paid $50 million for its state user fee on all of its revenue streams was able to deduct that entire $50 million from its Medicaid revenue total alone, resulting in an artificially low Medicaid-revenue-per-hospital-dollar-spent figure.

"We said this is a fee that's based on your total revenue, so it's not appropriate to subtract the entire amount just from your Medicaid," Gifford said. "It should be spread across all of them."

Hospitals have long complained of Connecticut's low Medicaid reimbursement rates, citing a figure of 62 cents reimbursed for every dollar spent by hospitals, with the hospitals eating the difference. Under the new user fee formula and other recent OHS changes, that reimbursement number jumps to 87 cents to the dollar, reflecting the increase in reported revenue.

"We can have a policy discussion about what's the best way to account for that user fee," Gifford said. "But we talked to national experts, we looked at how CMS (the U.S. Centers for Medicare & Medicaid Services) looks at things, and we think we're on very solid ground."

The Connecticut Hospital Association blasted the new formula and pointed to ongoing financial issues at many of the state's major hospital systems that make it a bad time to adjust the math.

"This new creative accounting disregards the totality of the role that hospital taxes play in supporting the Medicaid program and, as a result, shows false improvements in Medicaid reimbursement and undercounts the uncompensated costs that hospitals incur in providing essential access to Medicaid patients," the CHA said in a statement. "Changing the math may hide the problem, but it does not change the burden on hospitals."

Connecticut hospitals as a group showed some improvement in their financial results in fiscal 2023, according to an OHS report released earlier this month, although health systems as a whole still lost $463 million in fiscal 2023 and expenses grew by $1 billion in the same time period.

Medicaid underpayment along with cost-cutting from insurers is adding to the strain on Connecticut's hospitals, which underperform financially compared to other New England states, according to an analyst's report released by the hospital association late last year.

"We ask Gov. Lamont to reconsider these proposals and work with us to build a budget that protects patients, supports care delivery and the health care workforce and plans for Connecticut's future," Jackson said.

CT Democrats vow to fight for Medicaid

Attempts to shift costs in Connecticut come as President Donald Trump and Republican Congressional leadership seek to cut $2.3 trillion from the national Medicaid budget, according to a Republican policy explainer posted by Politico. U.S. House Republicans seek to cut at least $880 billion from Medicare and Medicaid through 2034, according to a budget resolution released Wednesday.

In response, American Hospital Association President and CEO Rick Pollack singled out cuts in Medicaid spending as a top concern for the industry in a statement on Wednesday.

"The American Hospital Association urges Congress to take seriously the impact of reductions in health care programs, particularly Medicaid," Pollack said. "While some have suggested dramatic reductions in the Medicaid program as part of a reconciliation vehicle, we would urge Congress to reject that approach."

Connecticut Democrats vowed to protect the program and raise reimbursement rates at a news conference on Jan. 28, a day that the state's Medicaid payment system was briefly taken offline in the wake of an order by President Trump.

"Let everybody in the state of Connecticut know that we understand what's going on nationally, but we can't stop doing our jobs," said House Speaker Matt Ritter, D-Hartford. "We're not going to stop putting forth good public policies on our committees, and we're going to do our very, very best to increase Medicaid rates."

House and Senate Democratic leaders introduced a bill that week to boost Medicaid provider reimbursements to the 75-80% range and expand coverage for services in behavioral health, dental, autism and naturopathy.

"I feel very hopeful about this announcement, the fact that we are making a statement about Medicaid dollars and where those dollars should be directed," Majority Leader State Sen. Bob Duff said. "We also need courage, we need people to speak up ... We need people to say what is right for this country and for our state."