Connecticut's Medicaid program is expected to see $100M in cost overruns
this fiscal year
[October 01, 2025]
Deep cuts in federal Medicaid assistance aren’t the only threat
to health care for needy families and children in Connecticut.
Gov. Ned Lamont’s administration has identified major cost overruns in
the entitlement program, known as HUSKY, which has struggled to stay out
of the red since 2022.
Less than three months into the new fiscal year, the Department of
Social Services, which oversees the majority of state Medicaid spending,
expects to exceed its $3.7 billion line item by $100 million, Lamont’s
budget staff reported in its last monthly report to the comptroller’s
office.
The legislature authorized $284 million extra to cover Medicaid cost
overruns in 2024-25. And the health care program topped its budget by
$166.3 million in 2023-24, according to records from the comptroller’s
office.
But it remains unclear whether state officials, who have secured
record-setting budget surpluses over the past eight years, will invest
more in Medicaid.
“The costs of pharmaceuticals are just astronomical,” Social Services
Commissioner Andrea Barton Reeves said last week, adding that continued
increases in inpatient hospital costs also are straining the Medicaid
budget. “It just costs more to deliver that kind of care.”
Since 2022, pharmaceutical costs covered by Medicaid — after industry
rebates have been applied — are up more than $278 million or 47%,
according to the department. Inpatient hospital costs over the same
period are up $119.3 million or 10.1%.
Hospitals are increasingly faced with Medicaid patients with chronic and
complex conditions, said Shantelle Varrs, the department’s deputy
commissioner. Increased demand for behavioral health services, staffing
shortages and rising medical inflation also are pushing inpatient
service costs upward, she added.
Further complicating matters, a temporary boost in federal funding
ordered in 2020 in response to the coronavirus has been exhausted.
Congress had boosted assistance to all states five years ago, even as it
temporarily blocked them from terminating Medicaid enrollees during the
worst of the pandemic. But that “continuous coverage” mandate expired in
April 2023, and Connecticut and other states lost their enhanced
reimbursements last year.
But while Connecticut’s Medicaid caseload has dropped since that mandate
was lifted, the caseload remains about 10% greater than pre-pandemic
levels.
An omnibus federal program run cooperatively with states, Medicaid in
Connecticut covers medical and behavioral health services, substance
abuse treatment, and nursing home and in-home care. It also supports
hospitals and federally qualified health centers that treat uninsured
and under-insured patients. The program served nearly 926,700
individuals in Connecticut last fiscal year, according to the Department
of Social Services, and remains one of the largest programs in state
government.
And the legislature has continued to expand Medicaid to meet growing
needs.
For example, in January 2023, the state began covering children 12 and
younger from families without qualifying immigration status. Initial
expectations were that 4,250 kids would be enrolled, but that number
reached 15,000 by July 2024.
Legislators this year also took a first step, albeit much smaller than
planned, to boost long-neglected Medicaid payments for providers who
treat low-income patients.
Connecticut hadn’t raised these reimbursement rates broadly since 2007,
leaving many insured patients unable to find physicians who will treat
them. Leaders said a $250 million infusion in this area is needed to
make a big difference and pledged to get there in four years, starting
with $75 million in extra Medicaid spending this fiscal year.
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 But because of budget caps and
savings rules, that $75 million investment ultimately was scaled
back to just $15 million in 2025-26.
The General Assembly this year also ordered an $80 million
investment in Medicaid funding for health centers. And while Reeves
called that a “smart investment,” she said it largely recognizes
demand that already has been straining these providers, meaning it
won’t necessarily stem ongoing growth in Medicaid costs.
“So, we might not see this turn around for another year or two,” she
said.
Meanwhile, Medicaid continues to gobble up an ever-larger share of
the state budget.
The $3.7 billion the legislature authorized the department for
Medicaid this fiscal year is up 55% from one decade ago, while the
General Fund has grown 34% over the same period.
“We are monitoring these trends closely,” Lamont’s budget spokesman,
Chris Collibee, said Monday, noting it’s early in the fiscal year,
which began July 1. “As the year progresses, these estimates will
likely be revised to reflect changes in the economy, expenditure
patterns, or other factors.”
Lamont took some heat last year from his fellow Democrats in the
legislature’s majority and from health care advocates when his
administration launched a study to return the state’s Medicaid
program to a model known as managed care.
Connecticut currently uses what’s known as a managed fee-for-service
model for its Medicaid program, where the state pays providers
directly for services delivered to Medicaid beneficiaries. In
managed care, or a traditional “ capitated managed care ” model, the
state instead pays a set monthly fee per member to insurance
companies to manage the Medicaid program, and the insurance
companies pay providers.
The eventual report, authored by independent consultants, found that
Connecticut’s Medicaid program boasts lower costs and similar levels
of access when compared to peer states, leading to the conclusion
that employing managed care would not likely save the state money,
prompting the administration to pull back.
Despite the surging costs in Medicaid, Sen. Cathy Osten, D-Sprague,
said Monday she believes state legislators will want to invest more
in Medicaid, particularly given expectations that new federal
cutbacks will eliminate hundreds of millions of dollars annually for
vulnerable patients.
Those cutbacks, most of which won’t take effect until next year or
later, also will take a heavy toll on nutrition assistance programs.
It still is unclear whether state legislative leaders and Lamont
will begin the debate in special session this fall, or in regular
session next February, on whether to use state resources to temper
federal cutbacks.
Osten and other Democratic leaders say Connecticut has the resources
to help, but it likely must scale back savings programs that have
channeled more than $1.8 billion annually since 2017 into reducing
pension debt and building reserves.
“People are going to have to choose between health care, their rent,
mortgage payments and other necessities” like groceries, Osten said,
adding a sicker, less productive population will cost Connecticut in
terms of economic productivity and demand for care at hospital and
health clinic emergency departments.
“I do believe we end up paying,” she said, “one way or another.”
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