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DHS seeks $251 million supplemental for Medicaid as GLP‑1 drug spending drives rate increases
Summary
Secretary Dr. Valerie Arkoosh told appropriators the department requests a $251 million supplemental to cover higher-than-expected Medicaid costs in 2025 and that GLP‑1 drugs added about $1.2 billion to managed-care rates for 2025; lawmakers pressed on long-term growth projections.
Secretary Dr. Valerie Arkoosh told the House Appropriations Committee on March 12, 2025, that the Department of Human Services requests a $251,000,000 supplemental to cover unexpected Medicaid costs in fiscal 2025. She said the shortfall reflects unusually high utilization and higher acuity among remaining enrollees since the post‑COVID unwinding, higher hospital and drug costs, and calendar-year rate-setting mismatches with the state fiscal year.
Why it matters: Medicaid is the largest component of the DHS budget and covers “a little over 3,000,000 Pennsylvanians,” Arkoosh said. Committee members warned that the governor’s multi-year spending projections appeared to underestimate likely growth; Representative Kotz asked whether prior‑year funds offset the supplemental request and pressed for clarity on out‑year assumptions.
Arkoosh described two immediate drivers: utilization changes after the unwinding of continuous coverage that left a more acute caseload in the program and rapid uptake of GLP‑1 class drugs. “We added $1,200,000,000 to our managed care rates for calendar year 2025 just because of GLP‑one,” Arkoosh said, noting the drugs were only added to Medicaid coverage in 2023 and the Commonwealth has limited longitudinal data about long‑run savings or health outcomes for obesity indications.
The department said it is pursuing prior‑authorization tightening and an April Drug Utilization Review Committee review of proposed medical‑necessity changes tied to body‑mass index and other clinical criteria. Arkoosh emphasized the body of evidence supporting GLP‑1 use for diabetes but said cost‑savings for obesity indications remain less well proven and require closer management.
On longer-term budgeting, lawmakers warned that governor’s proposed out‑year growth rates looked low relative to the department’s historical increases. Arkoosh said the department is hopeful spending growth will moderate next year and that it is examining major cost drivers, including GLP‑1 utilization, but acknowledged “there's a disconnect” lawmakers wanted addressed.
Ending: DHS staff told the committee the department will supply additional rate- and utilization detail to appropriators and present proposed prior‑authorization criteria to the state Drug Utilization Review Committee in April for possible changes to coverage for obesity indications of GLP‑1 drugs.
