Appropriations subcommittee hears House Fiscal briefing on Michigan Medicaid, behavioral health budget

At a meeting of the House Appropriations Subcommittee on Medicaid and Behavioral Health, House Fiscal analysts provided an overview of the FY 2024‑25 Medicaid and behavioral health appropriations, outlining funding sources, caseload trends, and fiscal risks tied to potential changes in federal matching rates.

House Fiscal deputy director Kevin Korscher and analyst Kent Bell told the subcommittee the DHHS Medicaid and behavioral health gross appropriations for FY 2024‑25 are about $28.3 billion, of which roughly $4.8 billion is state general fund and about $19.7 billion is federal matching revenue. "Medicaid is a joint federal state program primarily for low income families, kids, and persons with disabilities," Bell said, adding that roughly 70% of the medical services and behavioral health budget is funded through federal revenue. "For FY 24‑25, the match rate right now is 65.13%," Bell said.

Nut graf: The briefing matters because Medicaid and behavioral health together make up a large share of the state budget and changes to federal policy or match rates could require the Legislature to identify hundreds of millions or more in additional state funding. House Fiscal told the committee these appropriations account for about 35% of the state's $81.4 billion budget and roughly 32% of the state's $14.9 billion general fund.

House Fiscal presentations and member questions

Bell and Korscher presented program structure, eligibility ranges and financing. They said traditional Medicaid (for low‑income families, children and persons with disabilities) accounts for roughly 75% of the FY 24‑25 gross Medicaid appropriations, with the Healthy Michigan Plan serving primarily low‑income childless adults and accounting for about 24% of the gross appropriations. Bell summarized eligibility thresholds as varying by program (for example, Healthy Michigan is described in the briefing as set at about 133% of the federal poverty level for adults; other categories have higher thresholds).

Bell described caseloads as about 13.4% above pre‑pandemic levels and said the COVID‑era continuous enrollment requirement and the 6.2 percentage‑point temporary FMAP bump accounted for earlier spikes. He also said caseloads track more closely with poverty than with unemployment. Korscher noted managed care now covers about three‑quarters of expenditures and provides budget predictability through capitated rates.

Behavioral health: community providers and state hospitals

The presenters described behavioral health services as provided largely through the community mental health service programs (CMHSPs) and the prepaid inpatient health plans (PIHPs). Korscher said Michigan has 46 CMHs organized into PIHPs; the department directly appropriated $125 million of general fund for non‑Medicaid mental health services to the CMHs, which the mental health code directs to prioritize people with the most severe needs and urgent cases. "Nearly all of the behavioral health services are not provided directly through the state, but are instead provided through the community mental health services programs," Korscher said.

They also outlined trends in state psychiatric hospital spending and capacity. Korscher said the state operates adult psychiatric hospitals in Caro, Kalamazoo and at the Reuther facility and that the Hawthorne Center has been demolished; children who had been at Hawthorne are now at Reuther. House Fiscal said the state is constructing a new facility to replace Reuther and Hawthorne with an estimated opening in 2026 and that the executive recommendation for FY 2026 includes requested capacity and staffing increases for that hospital.

Cost drivers and recent increases

Members asked about recent expenditure increases. Korscher identified two significant drivers: expansion of certified community behavioral health clinics (CCBHCs) and a federal rule change that allowed larger special payments to hospitals. "The most significant ones would be the CCBHCs. The costs in '23 were $400,000,000 and the cost in '25 are about $525,000,000," Korscher said. He also said a federal rule change allowing higher special payments for hospitals increased gross Medicaid spending by more than $2.3 billion, financed through state restricted funds and provider assessments rather than general fund.

Match rate and fiscal risk

Committee members pressed staff on the federal match (FMAP) and the risk of changes at the federal level. Bell said if the FMAP fell by 10 percentage points in the traditional Medicaid space, Michigan would need to find roughly $1.6 billion in additional state funding. He also said proposals to reduce the Healthy Michigan Plan match from 90% to the state FMAP could add more than $700 million in state costs if the match were changed to approximately 65%.

Questions and follow‑up

Members asked for additional detail. Representative Roth asked for a breakdown within the aged, blind and disabled category; Bell said staff could provide that. Representative Robinson asked whether the budget shows how much spending is mandatory versus optional Medicaid; Bell explained the budget generally is not itemized by required versus optional services because many benefits are funded through broad line items or managed care contracts, though some waiver programs have discrete line items.

Ending

The subcommittee did not take formal votes; staff said they would follow up on requested data points. The meeting adjourned after questions and comments from committee members.