Whether Gov. Dannel P. Malloy “shredded” the state’s safety net in his first biennial budget — as he has repeatedly pledged not to do — may depend on the perspectives of state legislators, advocates and Connecticut’s neediest residents themselves.

But the state’s wide array of health care and other social services provided the one of the largest sources of spending cuts for Malloy in the biennial plan he presented Wednesday, to the General Assembly. The proposed $4.5 billion Medicaid budget alone falls $176 million short of the level needed to maintain current services next fiscal year.

The governor recommended eliminating a long-overdue rate adjustment for nursing homes, payments to hospitals to cover uninsured patients and cost-of-living adjustments for welfare recipients.

The administration also called for the phase out of prescription drug subsidies for the elderly, continued restrictions on former Gov. M. Jodi Rell’s Charter Oak Health Plan, reduced dental and vision services for the poor and new costs for both Medicaid and Medicare patients.

And more than a dozen smaller programs related to AIDS, autism, the developmentally disabled, teen pregnancy prevention, after-school programs, nutrition assistance, non-emergency medical transportation, nursing home patient assistance and the Connecticut Children’s Medical Center also were reduced.

But Malloy also kept his pledge to attract major new federal dollars to Connecticut, offering plans to leverage about $162 million in new aid from Washington through provider taxes on nursing homes, hospitals and care facilities for the developmentally disabled.

Though most cost-of-living increases were left out of governor’s budget, the plan also avoids any across-the-board reductions to most major care providers.

And the administration defended its plan to eliminate uncompensated care funding for hospitals, noting 2010 changes to the state’s welfare system would channel huge new Medicaid dollars into Connecticut’s acute care facilities.

“I worry about everything,” Malloy told Capitol reporters before presenting his budget, referring to the many challenges associated with closing the $3.2 billion deficit his administration is projecting for the fiscal year that begins July 1. “Do you think this is easy to do?”

The governor, who repeatedly vowed last fall that he would not “shred the safety net” to eliminate the deficit, also frequently warned that “everything was on the table,” and that even social services could expect some form of cut.

“The governor never said anyone wasn’t going to have to sacrifice,” said Roy Occhiogrosso, Malloy’s senior adviser. “But we believe these cutbacks have been made in a fair and human way.”

Given the state’s sluggish recovery from the recession, most state human service agencies are projecting solid growth in caseloads. That trend, coupled with the huge deficit and the stated goal of sparing the safety net from the deepest of cuts, triggered a need both for efficiency and reform, administration officials said.

Though Connecticut’s 29 acute care hospitals would lose $83.3 million next year to help offset the cost of uncompensated care, Malloy’s plan projects that hospitals can expect an extra $160 million next year in Medicaid funding thanks to the state’s decision last year to place its welfare program for single adults without children under the Medicaid umbrella. Hospitals officials contend, however, that this decision also has expanded their caseloads significantly, and that Medicaid rates still fall far short of covering the full cost of patient care.

To further bring more federal dollars into Connecticut, Malloy proposed levying a new hospital provider tax, which would raise $266.6 million in 2011-12. Patterned after a similar tax, or user fee, set up for nursing homes five years ago, this actually would redistribute the $266.6 million raised back to the hospital industry.

This back-and-forth arrangement is allowed under complicated federal rules that count both the hospitals’ payments and the state’s redistribution as Medicaid expenditures, in turn qualifying Connecticut for more federal reimbursement.

Similarly, Malloy’s plan cancels a scheduled $67 million rate adjustment for nursing homes, but it also would boost the industry’s provider tax from 5.5 percent to the allowable maximum of 6 percent.

When the fiscal smoke clears, nursing homes will face a net annual gain of $17 million. But Malloy’s budget calls for the $134 million federal windfall from the hospital tax to stay in the state’s coffers.

This increase also would net additional federal funding and result in a net annual gain to nursing homes of about $17 million.

“We’ll squeeze more federal revenue out of our provider tax for nursing homes and direct that money to the homes themselves so they can continue to provide care to our neediest seniors,” Malloy said Wednesday in his budget address. “I’m committed to making Connecticut a healthier state, and these investments will help get us there.”

Besides care providers, the governor’s plan also targets patients for sacrifices.

Both non-emergency dental and vision services for Medicaid patients would be reduced to save more than $10.6 million in 2011-12, while another $6 million would be gained by delaying the use of foreign language interpreters for Medicaid clients until 2014.

Nearly $4.4 million would be saved next year by beginning the phase out of the state-funded prescription drug subsidy program for seniors, the Connecticut Pharmaceutical Assistance Contract to the Elderly. Most ConnPACE recipients already rely on Part D of the federal Medicare program to cover most of their prescription costs, using the state program once their federal benefits are exhausted.

Under Malloy’s budget, all Medicare Part D recipients would be ineligible for ConnPACE. But these patients would be encouraged to join the Medicaid Savings Program, a special cost-sharing program that helps poor seniors pay for Medicare premiums, co-payments and deductibles.

The remaining ConnPACE caseload involves about 110 disabled patients, who would be grandfathered into a dramatically reduced program.

The administration also hopes to gain an extra $10.4 million next fiscal year by adding the state’s first-ever co-payment for Medicaid patients, and a new charge for patients eligible both for Medicaid and Medicare.

The state will require a $3 per visit co-payment for a wide range of hospital, home health and laboratory services for Medicaid patients under the governor’s budget, and a $25 monthly charge for Medicaid clients whose prescription drugs also are covered under Medicare.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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