Increasing Medicaid reimbursement rates, restructuring hospital taxes and reining in pharmaceutical costs topped Gov. Ned Lamont’s list of health care priorities in his spending plan for the fiscal year that begins July 1.
The governor also proposed adding funds for oversight of hospitals and home care programs.
In his budget address, Lamont addressed anticipated pushback from different sectors of the health care industry.
“There are some initiatives that may drive the lobbyists crazy,” Lamont said. “Ask them if they have a better idea. And, if not, hang tough.”
Medicaid reimbursement rates
Lamont’s proposal includes an increase of $35.4 million in state funding for Medicaid reimbursement to providers over the biennium, including $10.4 million in FY 2026 and $25 million in FY 2027.
The Department of Social Services recommended putting that funding towards increasing payments to health care providers, ensuring that behavioral health providers receive the same reimbursement for children and adults, and other adjustments.
Legislators and physicians for years have been sounding the alarm that the prevailing reimbursement rates were too low, making it unaffordable for health care providers to treat patients with Medicaid coverage.
Gov. Ned Lamont had been reluctant to implement across-the-board increases until the state completed a two-part study on Medicaid reimbursement rates. The DSS published part one last February and part two earlier this year.
Medicaid, known as HUSKY in Connecticut, provides health coverage to people with incomes below certain thresholds. Over a quarter of Connecticut residents currently receive coverage through the Medicaid program.
In 2007, Connecticut set the Medicaid reimbursement rates for most physician services at 57.5% of the Medicare rate at the time. The rates have not been broadly adjusted since, meaning many practitioners in the state receive Medicaid payments that are pegged to Medicare rates from 18 years ago — though certain providers, including primary care physicians and OBGYNs, have received rate increases.
Lamont’s increases aren’t as robust as those presented recently by Democratic legislators. They would put $250 million toward increasing the rates paid to all providers, increasing reimbursement to at least 75% to 80% of current Medicare rates over four years. For services that don’t have a Medicare equivalent, the state would use other benchmarks, including rates paid by peer states.
The Democrats’ bill would also establish an explicit process to review and update rates every two to three years — a process that currently does not exist, according to Rep. Jillian Gilchrest, D-West Hartford, co-chair of the Human Services Committee.
Gilchrest said that while it’s good to see Lamont acknowledge the need for rate increases, his proposal falls short of what’s needed.
“His office has had two years to look at and reflect on a Medicaid rate study, and I was hopeful that they would have proposed more, considering how far behind our rates are across the board,” Gilchrest said.
Hospital taxes
Lamont wants hospitals to pay an extra $140 million in the second year of the new budget but also would increase payments back to the industry by a matching amount. The administration estimates this arrangement would qualify Connecticut for an additional $94 million in federal Medicaid reimbursement.
The arrangement would help to dig the Medicaid program out of its fiscal deficit, projected to be $290 million in FY 2025. But, it also essentially asks hospitals again to trust that increased taxes won’t lead to fiscal abuses by the state down the road.
Lamont also wants the state to explore ways to reduce its own costs involving hospital treatment for retired state employees. The plan, which the administration received from Comptroller Sean Scanlon and the comptroller’s office, aims to save $100 million per year by 2026-27.
If that savings is achieved, the governor’s budget would increase supplemental payments to hospitals by $110 million. In other words, hospitals would lose $100 million in revenue from treating state retirees but gain $110 million in supplemental state payments as part of the back-and-forth provider tax system.
The Connecticut Hospital Association criticized the new proposal Wednesday, also noting its facilities would lose revenue if Lamont is successful in his effort to limit what medical providers can charge patients receiving care outside of their insurance networks.
“Gov. Lamont’s budget proposal contains policies that are devastating to hospitals, their workforce, and their patients,” the association wrote in a statement. “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.”
But Scanlon, who has been spearheading the discussions, said the proposals in the budget represent just the first step in figuring out what the relationship between the hospitals and the state will look like after a settlement agreement in a lawsuit between the state and hospitals expires in 2026. According to the settlement, Connecticut agreed to freeze all tax rates on hospitals through 2026, among other things.
The budget also includes funding to support a possible application for a federal waiver that would provide hospitals with money to put toward community health and contribute to the state’s efforts to raise Medicaid reimbursement rates, Scanlon said.
“The governor’s budget is a down payment on a concept that, in principle, is a good thing and a win-win. It’s not everything that the final deal will be,” Scanlon said. “Let’s just stay with what we’re doing. That’s what I’m committed to and that’s what the governor is committed to.”
Pharma costs
Lamont’s budget includes several provisions aimed at tackling the high cost of prescription drugs.
The governor’s proposed budget would allow the purchase of out-of-pocket and out-of-network prescription drugs to count toward consumers’ health plan deductibles, provided they pay a lower price for those drugs than they would at an in-network pharmacy with insurance. The measure is modeled after similar legislation in Texas and Tennessee.
“The bill … will ensure that residents can access affordable medications without sacrificing contributions toward their annual deductible obligations,” officials wrote in Lamont’s budget proposal. “Following this change, consumers will have greater ability to shop cost-consciously for their medications.”
The governor also recommended limiting price increases for generic and off-patent drugs to the annual rate of inflation. Manufacturers that raise prices above that threshold would receive a civil penalty, issued by the state Department of Revenue Services. “By focusing on generic drugs and those that are coming off patent, Connecticut can respect and encourage innovation while still helping clamp down on unfair price spikes,” officials noted.
Lamont has twice before suggested capping the rising cost of prescription drugs, but those bills were unsuccessful.
The governor also proposed launching a review of the feasibility of a drug importation program. The state would work with the Food and Drug Administration on the evaluation. The governor recommended spending $187,028 in the first year of the biennium and $313,538 in the second year for a consultant to assist the Department of Consumer Protection in drafting a feasibility study and program application. The funding will also support two drug control agents and a staff attorney to oversee importation.
However, Lamont is getting pushback from legislators on a proposal to eliminate Medicaid coverage of weight loss drugs, like Wegovy, that have been approved by the U.S. Food and Drug Administration for weight loss. Office of Policy and Management Secretary Jeff Beckham said the proposal will save the state roughly $28 million in the first year and added that several states and private carriers have made similar moves because of the high cost of the drugs.
In 2023, the legislature expanded Medicaid coverage to drugs that are FDA-approved for weight loss, but, despite the mandate, the Connecticut Department of Social Services has not been covering them because of cost concerns, said Sen. Matt Lesser, D-Middletown, one of the legislators who worked on the bill. Now, Lamont wants to eliminate that coverage entirely.
“The governor is not taking into account the short- and long-term benefits of weight loss treatment. While medications are expensive, the cost to taxpayers of ignoring severe obesity and obesity-related conditions is much higher,” Lesser said.
Increased hospital and home care oversight
Following news of Prospect Medical Holdings filing for bankruptcy, the governor is recommending a significant expansion in the type of hospital ownership transfers and changes that would be brought to the attention of the state attorney general’s office for investigation and potential action, especially private equity investment.
Lamont has proposed adding three positions and spending about $350,000 in the Office of Health Strategy and also in the attorney general’s office. The Office of Health Strategy would use the additional resources to “evaluate health quality and access criteria” related to requests by private equity firms to purchase hospital systems, while the attorney general would use the money and staff for investigations, actions and enforcement.
Officials with Prospect could not immediately be reached Wednesday for comment on Lamont’s proposal.
Attorney General William Tong said he is supportive of the plan.
“We’ve all seen what can go wrong when private equity is allowed to strip-mine our local hospitals and health care institutions,” Tong said in a statement.
Lamont’s budget also includes $72,758 in the second year of the biennium for an additional special investigator in the Department of Consumer Protection to boost regulation of homemaker companion agencies.
The Connecticut Mirror reported in 2023 that the state’s growing home care industry was operating with little oversight.
Unlike nursing home employees and home health aides, who must be licensed by the state Department of Public Health, there is no licensing process for homemaker companion agency workers. Instead, homemaker companion agencies must register annually with DCP.
“The Department of Consumer protection currently employs two full-time special investigators, a staffing pattern that has not changed significantly since 2012 despite the 176% increase in the number of registered homemaker companion agencies operating in the state,” officials wrote in Lamont’s budget proposal. “The additional special investigator will allow DCP to more effectively regulate this rapidly growing industry.”