House Finance weighs governor's FY27 Medicaid package, including 2.5% provider caps and $10M for uncompensated care

Chairman Slater convened the House Finance hearing on Article 8, the Medicaid article of the governor's FY27 budget, which the administration framed as a mix of rate-setting changes and statutory authorities to implement federal demonstrations.

Sharon, the presenter to the committee, said Medicaid remains a major part of the state budget and that caseloads have fallen from a high of about 113,000 to “about 81,000 now.” She told members the governor's proposal would cap provider rate increases at 2.5% in FY27 for hospitals, nursing facilities and federally qualified health centers, a step that the administration estimates will reduce general-revenue growth pressures compared with the November caseload assumptions.

"The governor's proposal caps all of the rates at 2 and a half percent," Sharon said, describing that cap as worth “about $1,500,000 in savings from general revenues this year.” She also explained the proposal to increase uncompensated care support by $10,000,000 (about $4,000,000 state share) in recognition of expected coverage losses tied to federal changes.

Brian Daniels, director of the Office of Management and Budget, told the committee the budget reflects a structural gap between revenue growth (projected at 2.4%) and expected expenditure growth. "We are recommending increasing rates for hospitals, nursing homes, and federally qualified health centers by 2.5%," Daniels said, framing that choice as a way to balance provider sustainability and fiscal constraints.

Secretary Richard Torres of the Executive Office of Health and Human Services said the $10 million for uncompensated care is intended to stabilize hospital services as more residents may lose coverage. "This $10,000,000 investment won't solve the entire uncompensated care issue, but it can make a meaningful difference by helping hospitals stabilize essential services," the secretary said.

Officials flagged several implementation complexities. Sharon outlined a long-running OHIC social and human services rate review and said some program categories (developmental disability services, DCYF providers) were excluded from past rounds; she described a phased approach and the need to reconcile differing agency estimates. She also noted confusion about how substance use residential rates were represented in prior documents and the Medicaid SPA.

Committee members pressed the administration on practical impacts: Representative Tanzi sought examples of prior uses of open Medicaid authority, and staff said it's typically used for technical corrections or minor program updates that do not have major fiscal impact. Several providers and advocacy groups in public testimony urged fuller funding of OHIC's recommended increases for social and human services and cautioned that partial funding could strain the provider network.

The article before the committee also contains non-rate elements: a proposal to limit GLP-1 coverage to type 2 diabetes patients (estimated $20,000,000 all-funds savings and $6,300,000 from general revenues) and authorization for EOHHS to conduct AHEAD planning for a federal global-budget demonstration. Sharon said the state's AHEAD planning would proceed pending CMS negotiation and requires legislative authorization for any future implementation.

The committee did not take votes during the hearing. Members requested follow-up materials on rate assumptions, OHIC's phasing and the distribution of the proposed uncompensated care funds; the administration said it would provide additional detail in the next round of hearings.