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Medicaid official warns provider-fee funding delay could force cuts to DOJ compliance and hospital payments
Summary
Medicaid staff told lawmakers the provider-fee program that funds children's behavioral health and other expansions is pending federal approval; a pause would force the state to halt payments and risk noncompliance with a Department of Justice settlement for children's behavioral health services.
Administrator Stacy Weeks told the subcommittee that many behavioral-health and hospital supplemental programs in the governor's budget rely on revenue from the voluntary hospital provider fee and related state-directed payments.
Weeks said federal review of the state's state-directed payment preprint has been slower than normal under the current federal administration. "If we don't have an approval in the next few weeks, we will pause the program. So we are not collecting a tax that we cannot pay out on," she said.
The administration identified the provider-fee funding as the source for several program proposals tied to the state's settlement with the U.S. Department of Justice over inadequate community services for people with disabilities. Weeks said the budget assumes about $59,000,000 in provider-fee revenue in state fiscal year 2026 targeted for children's behavioral health services. "If on the off chance that this was not approved, we would be looking at filling that $59,000,000 hole and not being able to comply or continuing to not be in compliance with the DOJ settlement," Weeks said.
Why it matters: The provider-fee funding is a linchpin for multiple behavioral-health rate increases, mobile crisis expansions and a new specialized managed-care carve-out for children; a federal denial or extended delay could force program pauses and would affect hospital cash flow.
Lawmakers pressed Weeks on the hospitals' exposure if federal approvals were not issued. She said the calendar-year program constitutes roughly $800 million in federal funds and that hospitals receiving those state-directed dollars would see a material revenue impact if payments stop; she said the fee program is voluntary and could be discontinued by provider vote.
Public commenters from the hearing's public comment period urged support for the skilled nursing facility behavioral-care program (BCC). Dan Musgrove of Strategies 360, representing Behavioral Health Solutions, said the program has produced cost savings and greater capacity at skilled nursing facilities and asked the committee to fund the proposed bonus payments.
Ending: Weeks said the administration will continue discussions with CMS and keep the committee informed: "I am hopeful ... that we will see something in the next few weeks that we will not have to cut these programs. But I cannot guarantee." (Administrator Stacy Weeks)
