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DSS: Medicaid spending projected at $9.3B for FY26 amid rising pharmacy and HCBS costs
Summary
DSS officials told the committee Connecticut’s projected FY26 Medicaid gross spending is $9.3 billion, with hospital costs representing 27% of the budget, nursing homes 18%, HCBS 17% and pharmacy 12%. Presenters flagged rising PMPM costs, declining drug rebates and an $80 million projected deficiency resolved with supplemental funding.
Chantal Vars, deputy commissioner for finance and administration at the Department of Social Services, and Brianna Mitchell, assistant chief over budget, presented a fiscal update on Connecticut’s Medicaid program to the NAPOC committee on June 12.
Mitchell said the department projects gross Medicaid spending of about $9.3 billion in fiscal year 2026. "Hospital expenditures are estimated at 27% of the Medicaid budget," she said, while nursing homes and long‑term care account for roughly 18%, home and community‑based services (HCBS) 17% and pharmacy 12%.
Presenters described a diverging trend: overall Medicaid enrollment has declined since the end of the public health emergency while per‑member‑per‑month (PMPM) costs have increased, a result the department attributes to a loss of lower‑utilizing members and retention of higher‑acuity enrollees. "The per member per month cost continues to increase while overall membership continues to decrease," Mitchell said.
DSS staff identified three principal cost drivers: increased utilization, enrollment growth in HCBS programs and rising specialty drug costs. The department noted pharmacy rebates as a percentage of pharmacy spending have fallen (cited around 55.7% in FY26 versus 58.6% in FY25), driven in part by high‑cost specialty drugs and manufacturer decisions about rebate participation.
The presentation recapped FY27 budget highlights: $3.9 million in additional physician supplemental payments for UConn Health; $26.2 million gross to support nursing homes’ transition to the patient‑driven payment model (PDPM); rate increases for Birth‑to‑3, intermediate care facilities, optometrists and other providers; and increases to hospital supplemental payments disclosed separately from the Medicaid operating budget.
Committee members asked about cross‑state comparisons, enrollment declines (with the public health emergency unwind identified as a major factor), distinctions among long‑term care categories and the department’s low administrative overhead. DSS officials said they will provide more comparative data and enrollment breakdowns. Committee members also noted the department’s administrative cost figure of about 2.7% as efficient compared with many managed‑care states.
Next steps: DSS will follow up with additional data on enrollment breakdowns, comparative state metrics, and outcomes analysis and will provide slides and links to committee members.
