DHSS outlines $5.46 billion FY27 budget, warns federal SNAP and Medicaid rule changes could raise costs and cut benefits

Delaware Department of Health and Social Services leaders presented the FY2027 Governor’s Recommended Budget to the Joint Finance Committee on March 18, saying federal policy changes — not local program design — are the largest near‑term budget risk.

“Federal policy changes often push in the opposite direction of our values,” DHSS Secretary Kristen Link Young said, introducing the department’s three priorities: responding to federal requirements, improving service quality and customer experience, and finding structural ways to lower health care costs. The FY27 recommendation totals $5.46 billion for DHSS, including about $1.95 billion in general‑fund resources, roughly $200 million more than the prior year.

Why it matters: Much of the increase — about $128 million of the general‑fund growth — is tied to Medicaid enrollment and higher costs in long‑term services and supports, officials said. Division of Medicaid and Medical Assistance director Drew Wilson told the committee that the growth is concentrated in high‑cost eligibility categories, including people needing intensive long‑term care either in nursing facilities or at home.

Federal changes shifting costs and eligibility: Secretary Link Young walked the committee through three federal developments the department is planning around. First, federal SNAP administrative funding will drop from 50% to 25% of certain costs, a mechanical shift that adds roughly $9 million in state spending. Second, federal rulemaking could create state liability for some SNAP benefit dollars in future federal fiscal years depending on state error rates; Delaware expects no liability in FFY28 but could face exposure in FFY29 if error rates do not fall. Third, recent federal legislation (referred to in testimony as HR 1) requires new work‑reporting and eligibility changes that will force more frequent eligibility checks and the termination of benefits for some groups of lawfully present immigrants.

“Starting this year, we are required to end benefits for groups of lawfully present immigrants,” Link Young said, citing the federal change that will affect refugees and other humanitarian‑status arrivals unless federal guidance or relief is forthcoming.

Targeted investments and offsets: The GRB includes targeted rate increases and program investments: annualizing a mental‑health provider rate increase, phase‑in funding tied to the McNesby Act for some developmental‑disability providers (about $11 million in FY27), and a one‑time $2 million lead remediation appropriation. DHSS leaders also described plans to move several programs off tobacco‑settlement funding into general funds as that revenue source wanes.

Health system reforms and grants: Agency leaders said they are pursuing federal partnerships and system reforms to lower total health care spending — for example, applying to a federal program that would allow Delaware to jointly hold hospitals accountable for total spending and exploring value‑based payment pilots (AHEAD/AHEAD‑style models). Drew Wilson described CMS approvals that enabled implementation of a hospital provider tax (SB 13) but cautioned that federal rules and congressional action have introduced uncertainty about the longer‑term design and pace of those revenues.

Public health and program capacity: Division directors told the committee about accomplishments and risks. DPH Director Steven Blessing highlighted a public‑health laboratory expansion (genetic sequencing, wastewater surveillance) and federal grant wins, while Division of Healthcare Quality Director Amanda Levering said survey and complaint work has returned to more timely completion after a backlog. Division directors also warned about grant timing and federal award instability that can create temporary staffing and service gaps.

What’s next: Committee members pressed DHSS for more detail on program‑level numbers and carryover balances; the department committed to provide specific cost estimates and demographic breakdowns (for example, more precise cost estimates for expanding purchase‑of‑care eligibility if federal rules change). DHSS also said it will provide further updates on implementation timelines for HR 1 requirements and on the status of SB 13 in light of changing federal rules.

The committee paused the presentation for member questions and scheduled division‑specific follow‑up and public comment sessions later in the day.