Senate Finance hears House Bill 5,076 with focus on Medicaid funding, hospital payments and system changes

The Senate Committee on Finance took up House Bill 5,076 on March 20, 2025, a measure that contains the governor's FY2026 budget for the Executive Office of Health and Human Services and accompanying Medicaid-related statutory changes. Brian Daniels, director of the Office of Management and Budget, and Richard Sharas, secretary of EOHHS, led the administration's presentation to the committee and outlined proposals to control Medicaid expenditure growth while maintaining targeted investments.

The administration told the committee it expects state revenues to grow more slowly than expenditures over the five‑year forecast and that Medicaid and related grants and benefits are a major driver of cost growth. "Medicaid does represent the lion's share of that spending," Brian Daniels said, adding that the program is an entitlement and therefore difficult to reduce without changing eligibility or benefits.

Why it matters: Medicaid and the agencies under EOHHS account for a large share of the state budget. The bill bundles appropriations for operating and medical assistance (Medicaid), and contains several statutory changes (Article 8) that alter how hospitals, nursing homes and home‑ and community‑based services are reimbursed.

Key budget elements described by administration witnesses include expanding OHIC's (Office of the Health Insurance Commissioner) rate review authority to primary care, continued investment in certified community behavioral health clinics (CCBHCs), a pharmacy cost‑containment initiative, an investment to increase fraud recovery, and technical changes to hospital payment programs. Daniels and Lori Zolano, EOHHS chief financial officer, said the budget proposes a 2.3% rate increase for hospital inpatient/outpatient and for nursing homes, and recommends phasing out a discretionary upper payment limit (UPL) supplemental program in favor of larger state‑directed payments to hospitals.

Administration figures presented in committee: state‑directed hospital payments are shown as a historic increase (the administration cited roughly $327,000,000 in state‑directed payments), while the proposed elimination of the UPL would reduce a discretionary program of about $18,300,000. The budget also seeks to authorize the hospital licensing fee for FY2026 and to shift the base revenue year for that fee from 2022 to 2023.

The bill includes technical Medicaid changes (Article 9) that allow EOHHS to pursue federal approvals for state plan and waiver changes, and to implement an "eConsults" program that the administration expects would yield modest savings by enabling primary care clinicians to consult specialists without additional in‑person visits. The administration also requested funding for a modular Medicaid Enterprise System (MES) and outlined a phased procurement approach.

Committee members asked about longer‑term fiscal assumptions, the timing and scope of the MES procurement and implementation costs, and the administration's preparations for possible federal changes to Medicaid financing. Secretary Sharas described the health care system planning cabinet's foundational report and said EOHHS will submit legislation to collect interim financial information from hospitals, nursing homes, FQHCs (federally qualified health centers), CCBHCs and large physician groups to monitor solvency.

The hearing ended with public testimony from provider groups and unions that raised concerns about the proposed rate changes and potential effects on staffing and access to care. No formal vote on the bill occurred during the hearing.

Provenance: Committee presentation and testimony described above are drawn from the March 20, 2025 Senate Committee on Finance transcript covering House Bill 5,076.