A controversial plan that could end state health assistance for more than 13,000 of Connecticut’s poorest residents fell into political limbo late Tuesday afternoon.

After a day-long meeting, two panels of state lawmakers balked — at least for now — at giving Gov. Dannel P. Malloy’s administration the go-ahead to set into motion a plan that could limit who in Connecticut can receive Medicaid, government’s health program for the poor.

The administration wants the federal government to allow Connecticut to impose two temporary restrictions on the Medicaid for Low Income Adults program, known as LIA. But the administration needs the approval of the Appropriations and Human Services committees to make the request. The committees have until Aug. 18 to act.

Under the state law governing such applications, unless the panels vote to block the move within 30 days of receiving the proposed application, the administration can ask Washington to proceed without their permission.

“We’re still trying to see if we can resolve some of the difficult questions that were asked,” said Sen. Toni Harp, D-New Haven, co-chairwoman of the Appropriations Committee, after the meeting.

The scenario that the administration presented to lawmakers last spring is a LIA program that faces rapidly surging enrollment and costs.

When the 2010 legislature and Gov. M. Jodi Rell converted the former State Administered General Assistance Program into LIA, the caseload was 47,000. It now approaches 78,000.

Malloy’s budget director, Office of Policy and Management Secretary Benjamin Barnes, told the legislators that LIA’s budget stood at $622 million last fiscal year, and changes are necessary to stem rising costs until federal aid for the program increases in 2014.

Because Medicaid is a federally administered health care program, states seeking to make changes to programs under that umbrella, such as LIA, must ask the U.S. Centers for Medicare and Medicaid Services for approval.

If the Malloy administration is allowed to submit the application, and if federal officials grant approval, the Department of Social Services would start to contact LIA clients in October, with the goal of identifying the newly ineligible patients by Jan. 1.

“While the governor is committed to serving the state’s most needy citizens, he does not want to use scarce resources to provide services to individuals who could otherwise pay for them,” Barnes told lawmakers. “…We’ve seen very fast-growing costs in the LIA program, faster than I think anyone anticipated.”

Proposed restrictions

LIA serves single adults who have no minor children and whose incomes are at or below 55 percent of the federal poverty level.

To control costs, the administration has proposed two eligibility restrictions:

1) Setting an asset limit of $10,000;

2) And, if a LIA applicant is between ages 19 and 26 and lives with a parent or can be declared as a dependent for income tax purposes, then the parent’s income and assets can be factored in when determining if the applicant is eligible.

Barnes said, in some cases, the system now allows residents who can afford to pay for their own health care to have access to Medicaid.

The proposed restrictions would end in 2014. Under the national health care reform legislation adopted in 2010 and upheld by the U.S. Supreme Court in June, that’s when the federal government would cover 100 percent of Connecticut’s LIA costs. Federal reimbursements now cover 50 percent of LIA expenses.

DSS estimates that with these changes, nearly 13,400 LIA recipients would lose their Medicaid coverage.

Dropping those 13,400 poor residents from Medicaid would save the state a projected $50 million. Legislators agreed last May to build that savings into the 2012-13 state budget.

‘Hurts real people’

But health care advocates have argued since then that the proposed restrictions could, in fact, affect 15,000 people. And more importantly, they say, there is no evidence that most of these recipients have the resources to buy private health insurance.

Sheldon Toubman, a staff attorney with the New Haven Legal Assistance Association, said he fears that because of longstanding problems at DSS, some people who comply with the new rules will lose coverage anyway.

His nonprofit group has sued the state on behalf of DSS clients, charging that the agency has failed to process applications for Medicaid and food stamp assistance in a timely fashion.

Requests to renew assistance have been improperly terminated by DSS — even though clients submitted the correct paperwork on time — because the agency lacks staff to record this paperwork in its data processing system.

And despite assurances from DSS Commissioner Roderick L. Bremby that more than 120 new staffers were added in March — and permission to add another 100 was just granted — Toubman said he thinks the proposed asset test represents another wave of paperwork that will swamp the department.

The result, he said, will be more clients improperly removed from the LIA rolls for months before errors are discovered and corrected.

“The reason they are pushing it is they need to save more money,” Toubman said.

Robert Davidson, executive director of the Eastern Regional Mental Health Board, also disputed that significant numbers of LIA clients can buy their own health insurance.

“We see them in soup kitchens and homeless shelters. DSS doesn’t see them at all,” he said, adding that the administration’s proposal “hurts real people to save imaginary money.”

State Sen. Edith G. Prague, D-Columbia, was one of the most vocal critics Tuesday of the proposed changes, predicting they would worsen the health of poor individuals until they had to seek expensive treatment in hospital emergency rooms. By law, hospitals cannot refuse to treat people because they can’t pay, but they receive state aid to help cover the cost of this care.

“Not only is it a disaster for patients, for human beings who need care, but it will cost money for the state,” Prague said.

And Rep. Minnie Gonzalez, D-Hartford, said she also fears poor individuals will be left with no place to turn, adding that her constituents complain they can’t even get DSS social workers to respond to phone messages.

“I am saying, commissioner, with all due respect, you have lousy workers there,” Gonzalez said. “They don’t care about people in need.”

“We know that we have a capacity issue. That’s something we’re focusing on,” Bremby said.

But the commissioner, who took the post in early 2011, said he is trying to reverse decades of inadequate funding for data processing and staffing.

“We’re making an investment in a system that we generally neglected for 10, 20 years. … It’s going to take a little while to turn that corner,” Bremby said.