Connecticut's Medicaid shortfall punches hole in budget

(The Center Square) — Connecticut’s Medicaid program for low-income residents is facing $210 million in projected cost overruns only two months into the new fiscal year as the state continues to expand coverage to undocumented children, according to a new state report.

The report by the state Office of Policy and Management found that the significant increase in spending is being driven largely by higher enrollment in the program, which is jointly funded by the federal government, and increased demand for hospital outpatient, clinic and pharmacy services.

"A $210.0 million deficit is forecast in the Medicaid account based on current trends which continue to exceed budgeted levels, particularly in the areas of hospital outpatient, pharmacy (including lower rebates) and clinic services," Jeffrey R. Beckham, Secretary of the Office of Policy and Management, wrote in the report.

"The cost of coverage for undocumented children also continues to increase with over 15,000 children enrolled as of July 2024," he added.

The agency's report noted revenue shortfalls in the state Department of Corrections, the Department of Mental Health and Addiction Services and other agencies.

"It is important to note that this represents the first projection of the state’s budget outlook for FY 2025," Beckham wrote. "As the year progresses, these estimates will undoubtedly be revised to reflect the impact of changes in the economy, expenditure patterns, and/or other factors."

Legislative leaders were informed of a likely shortfall in Medicaid funding earlier this year but opted not to reopen the budget to pump additional money into the program.

Gov. Ned Lamont had asked for $3.4 billion in Medicaid spending through the state Department of Social Services' budget in the 2024-25 fiscal year, or about $200 million more than previously budgeted, but the plan was rejected.

More than 950,000 people in Connecticut are on Medicaid, accounting for about 22% of the state's population, according to KFF, a Washington, D.C.-based health care think-tank formerly known as Kaiser Family Foundation.

The state and federal government jointly spend about $9.8 billion a year on the program, according to the foundation. About 53% of the spending was devoted to primary care, KFF's data shows, while about 37% went to long-term care costs.

In 2023, the Democratic-controlled Legislature approved a plan to expand the state's Medicaid coverage for children up to 15 years old, including undocumented immigrants. Previously, the program covered children up to the age of 12.

The widening shortfall also comes as Lamont and Democratic legislative leaders are considering boosting Medicaid spending in the next session by increasing payments to doctors who treat low-income patients. The current rates haven't been increased broadly since 2007.

Lamont has also floated plans to return the state's Medicaid program to a "managed care" system that pays insurance providers a monthly fee to cover care and services for beneficiaries. Connecticut currently uses a "fee-for-service" system that pays providers directly for treatments to patients.