Joint Finance panel approves Medicaid forecast adjustments, creates dedicated hospital-assessment program after heated debate

The Joint Finance-Appropriations Committee on Friday approved a 2026 Medicaid forecast supplemental and adopted the governor’s FY2027 Medicaid package, including a newly created hospital-assessment budget program and several enhancements intended to fund IT modernization, estate recovery and program-integrity work.

Alex Williamson, budget and policy analyst with the Legislative Services Office, told the committee the 2026 supplemental request equals $107,244,000 gross — about $92.6 million from the general fund, $23.67 million from dedicated funds and a federal reduction of roughly $9.02 million — and that the action, combined with provider-rate reductions enacted in Senate Bill 1331, produces a net impact shown in the packet. "This is the updated Medicaid forecast based on current rates, services, and eligible populations," Williamson said while walking through the packet and on-screen tables.

The committee also approved a budget-neutral reclassification tied to House Bill 345 that moves federal match for the hospital upper-payment-limit into the state hospital-assessment dedicated fund and creates a separate hospital-assessment program to more clearly track the UPL funds. Williamson said the change shifts approximately $349 million from federal appropriation lines into dedicated funds and creates the new program for clearer accounting.

Members debated several competing FY2027 substitute motions that differed on how to meet the governor’s requested reductions and where to allocate cuts. One committee member, speaking for a motion that would reduce residential habilitation provider funding by roughly $33.5 million and shift other forecast adjustments, argued the approach was a compromise to avoid immediate provider failures. "I think that, can you refer to legislation in this?" the member said when describing the motion, and later added that the aim was to "split the baby" to reduce harm to services.

Another senator argued against shrinking the forecast target in committee, warning that doing so here could remove incentives for germane policy committees to make programmatic decisions. "If this comes back next year as a supplemental, we haven't really done anything," that member said.

Senators and representatives repeatedly referenced the earlier 4% provider-rate reduction and its operational effects on services. In debate one committee member said, "The 4% rate reduction already has really wreaked havoc on a lot of services ... We've cut the ACT teams and the peer support. We know we've had three deaths because of that," framing the harms the motion’s sponsor said the substitute sought to avoid.

After sequential roll-call votes the committee rejected the alternative substitute and the substitute motion, and then approved the original motion on a final roll call. The clerk announced the result as a majority in each committee voting in the affirmative; the committee recorded a due-pass recommendation for the actions taken.

What happens next: the committee’s recommendations will be reflected in the JFAC report and accompany budget bills and trailers to floor and further review. The analyst told members the MMIS replacement remains a multi-year, largely federal-funded IT project (roughly 90% federal) and that each year will come back to JFAC for appropriation of the state match held in a dedicated fund.

Votes at a glance: the committee recorded votes on the two 2026 supplementals and the FY2027 Medicaid maintenance and enhancement package; the clerk announced the motions carried and will be transmitted with the committee’s due-pass recommendations.