DHHS directors outline budget changes, Medicaid savings proposals and potential federal risks

Nathan White, DHHS chief financial officer, and Marissa Henn, deputy commissioner, opened the department’s presentation with a high-level briefing on DHHS’s scope and the complexities of federal matching and maintenance-of-effort requirements that drive much of the Medicaid budget. White and Henn told senators DHHS manages multiple federal funding streams, a public assistance cost allocation plan and numerous programs that interact across divisions.

Henry Lippman, Medicaid director, provided a focused run-through of Medicaid-related provisions in the House budget and related policy bills. Lippman said a few of the most consequential items in the House phase were a proposed children’s Medicaid premium for families above 255% of the federal poverty level, tightening of redetermination and eligibility verification practices (rolling back pandemic-era flexibilities), and changes to the Granite Advantage program that alter the program’s statutory budget treatment.

Lippman said the children’s premium would apply to eligible children above 255% of the federal poverty level and the department estimates it could affect about 8,600 children out of the roughly 90,000 currently covered; the department projected first-year general-fund savings of about $3.3 million and $11 million in year two from that measure. He also described an eligibility tightening and ex-parte screening changes designed to reduce inappropriate continuations of coverage; Medicaid officials noted considerable redetermination work since the public-health emergency and a large workload of redeterminations to finalize.

The House added several fiscal items Lippman flagged: a 3% across-the-board Medicaid rate reduction (estimated roughly $17.5 million in a six-month window and approximately $35 million if continued a full year); a one-month delay in capitation payments (about $25 million shift to the next fiscal year reported later in the hearing); and assumed higher Medicaid enhancement tax revenue (the department projected $12.2 million and $10.4 million in two fiscal years as an updated forecast). Lippman and staff cautioned the committee these numbers would change as the budget negotiation continued.

Lippman discussed policy uncertainty on the federal side: proposals in Washington to reduce allowable provider tax levels and possible changes to federal matching rules that could raise state costs if enacted. He also reiterated departmental concerns about moving Granite Advantage program funding onto the general-fund operating budget (House language would add Granite Advantage to general fund lines and could increase the state’s exposure if future adjustments are required), and warned the committee these changes could increase state general-fund obligations and affect provider contracting.

Committee members asked about operational impacts: Lippman and White said a 3% rate cut would be felt across providers and could affect substance-use-disorder treatment, long-term care and mental-health providers; they cautioned that some near-term savings could create higher downstream costs. White and Lippman also stressed the department has a significant number of unfunded positions (about 394 positions, roughly a 12% vacancy rate in the department) and a $46 million “back of the budget” cut for the current biennium (roughly $23 million per year) that will constrain program flexibility.

Ending: Lippman asked the committee to consider the fiscal tradeoffs, and warned that federal policy changes (provider-tax limits or lower federal-match floors) could materially increase state costs. Senators and DHHS staff agreed to continue review and technical follow-up on specific items including premium administration, eligibility operations and projected tax revenues.

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