Your father in a nursing home, your blind neighbor, and the children from the low-income family down the street may all rely on it.
Medicaid, the government program that provides health care to nearly a million Connecticut residents, has become a source of contention in Hartford and Washington, D.C. this winter as costs continue to rise.
According to health data website KFF, care for Medicaid patients in Connecticut will cost $9.8 billion in 2024, with the federal government paying for roughly half of that total and the state covering the rest.
In our state, the Medicaid program covers one in every five adults aged 19 to 64, three out of every eight children, two out of every three nursing home residents, and two out of every five disabled people.
The bill may be large, but Connecticut is unique 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 for most Northeastern states, and administrative costs are significantly lower than in states that fund Medicaid through a managed-care model (3.8% vs. 9.4%).
“I want Connecticut to do everything we can to ensure that our Medicaid recipients receive high-quality, equitable care and that we use these federal dollars as efficiently as possible,” Gov. Ned Lamont said in December, when the report was released.
To improve efficiency, Lamont proposed changes to 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,” said Mr. Trump.
“Our budget includes some initiatives that will drive the lobbyists crazy,” she said. “Ask them if they have a better idea.”
CT hospitals dispute funding plan
According to statements from the Connecticut Hospital Association, Lamont’s proposals, combined with a recent change in the state’s Medicaid funding formula, appear to be driving Connecticut’s 27 acute-care hospitals crazy.
“Gov. Lamont’s budget proposal contains policies that are devastating to hospitals, their workforce, and their patients,” CEO Jennifer Jackson stated on February 5. “These proposals will add significant financial burdens on local hospitals at a time when they are already struggling.”
Lamont’s proposals are linked to a new formula that determines how much hospitals are reimbursed for providing care to Medicaid-covered patients.
Regulators from the state’s Office of Health Strategy, Department of Social Services, and Office of Policy and Management met last year to investigate why hospitals received an ever-increasing share of Medicaid funding while continuing to claim underpayment, according to OHS Commissioner Deidre Gifford in an interview on February 7.
Medicaid costs for hospital care in Connecticut have been rising at a much faster rate than spending on 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 regulators’ mission. Connecticut, unlike its neighboring states, did not account for all 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,” according to Gifford. Hospitals agreed to the changes but objected when OHS decided to change the formula for accounting for the state’s provider tax.
Although all but three Connecticut hospitals are nonprofit, the state is permitted to levy a “user fee” or provider tax based on a hospital’s total revenue. According to the OHS, the user fee generated $839.6 million in revenue for the state in fiscal 2023. This year, the regulatory agency altered the 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 could deduct the entire $50 million from its Medicaid revenue total, 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 pointed out. “It should be spread across all of them.”
Hospitals have long complained about Connecticut’s low Medicaid reimbursement rates, citing a figure of 62 cents reimbursed for every dollar spent by hospitals, with the hospitals bearing the remainder. Under the new user fee formula and other recent OHS changes, the reimbursement rate rises to 87 cents per 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 told the crowd. “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 criticized the new formula, citing ongoing financial issues at many of the state’s major hospital systems as a bad time to change 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 Centers for Medicare and Medicaid Services (CHA) said. “Changing the math may hide the problem, but it does not change the burden on hospitals.”
According to an OHS report released earlier this month, Connecticut hospitals’ financial results improved slightly in fiscal 2023, but health systems as a whole lost $463 million and expenses increased by $1 billion during the same period.
According to an analyst’s report released late last year by the hospital association, Medicaid underpayment, combined with insurer cost-cutting, is putting additional strain on Connecticut’s hospitals, which underperform financially when compared to other New England states.
“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 told the press.
CT Democrats vow to fight for Medicaid
Attempts to shift costs in Connecticut occur 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. According to a budget resolution released Wednesday, US House Republicans intend to cut at least $880 billion from Medicare and Medicaid by 2034.
In a statement released on Wednesday, American Hospital Association President and CEO Rick Pollack identified Medicaid spending cuts as the industry’s top concern.
“The American Hospital Association urges Congress to take seriously the impact of reductions in health care programs, particularly Medicaid,” Pollack told reporters. “While some have suggested dramatic reductions in the Medicaid program as part of a reconciliation vehicle, we would urge Congress to reject that approach.”
At a news conference on January 28, Connecticut Democrats vowed to protect the program and raise reimbursement rates, a day after President Trump’s order temporarily shut down the state’s Medicaid payment system.
“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 and State Rep. 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.”
That week, Democratic leaders in the House and Senate introduced legislation to increase Medicaid provider reimbursements to 75-80% while also expanding coverage for behavioral health, dental, autism, and naturopathic services.
“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,” said State Senate Majority Leader Bob Duff. “We need courage, and people to speak up… We need people to say what is best for this country and our state.”