Medicaid clients, seniors, health care providers face cuts under governor’s plan

Gov. Dannel P. Malloy’s proposed budget aims to save hundreds of millions of dollars through cuts to health care and social service programs, including reductions in Medicaid eligibility, payments to health care providers and grants for mental health and substance abuse treatment.

It would require seniors to pay more for home care and eliminate plans for an effort to better coordinate the care of the costliest Medicaid clients. Hospitals would pay $165 million more in taxes and an estimated 34,000 parents would no longer be eligible for Medicaid.

Although the proposal includes some additional funding for the state agencies that serve low-income residents and those with mental illness, addiction or developmental disabilities, budget director Benjamin Barnes acknowledged that it was unlikely to be enough to meet the demand for services.

The plan includes a range of cuts that are likely to draw the ire of advocates and some legislators. Some proposals are ideas that legislators rejected in previous years, but it’s not clear whether this attempt – as the state faces a $1.3 billion budget deficit next fiscal year and a larger one after that – will get a gentler reception.

Many advocates for health care and social service programs were expecting a tough budget. But Ellen Andrews, executive director of the Connecticut Health Policy Project, said it was worse than she thought. She was particularly concerned about cuts to Medicaid, which she noted occurred despite recent reductions in per-member spending.

“It’s going to really unravel things,” she said.

Medicaid eligibility cuts

Malloy’s plan revives a proposal he made two years ago to move parents earning more than 138 percent of the poverty level out of Medicaid. They would instead be eligible to buy coverage through Access Health CT, the state’s health insurance exchange, at prices deeply discounted by the federal government.

The administration estimates that the change would save the state $44.6 million in the upcoming fiscal year and $82.1 million the following year. Barnes said it would affect an estimated 34,000 parents.

Legislators rejected a similar proposal in 2013. Many critics of the proposal warned that it could increase the number of uninsured state residents because low-income parents might opt not to pay premiums. Those who buy plans would also in many cases face copayments and deductibles when seeking medical care, which people in Medicaid don’t.

But Barnes noted that Connecticut now has the country’s second-highest income eligibility for parents with minor children, 201 percent of the poverty level. Other states have reduced their eligibility for parents as subsidized insurance plans became available as part of the federal health law, he noted.

Higher fees for home care

Another proposal likely to be controversial is Malloy’s plan to cut off entry into a state-funded portion of the Connecticut Home Care Program for Elders and require those already in the program to pay more toward their care.

The proposal affects what’s known as “category 1” of the home care program, which funds services for just over 1,100 seniors who are at risk of needing to go into a nursing home if they don’t receive home care. Currently, participants must pay 7 percent of the cost of their care. Malloy’s plan would raise that to 15 percent.

Raising the cost-sharing limit and freezing the program to new clients would save $13.2 million over two years.

Advocates for seniors and home care have fought several past proposals to increase what seniors pay in the program, and have warned that raising the cost leads people to drop out of the program, making them more likely to end up in a nursing home, at a higher cost.

Claudio Gualtieri, AARP Connecticut’s state advocacy director, called Malloy’s proposal “a horrible idea” that would not save the state money in the long run and could harm vulnerable, frail seniors while further burdening family members who provide unpaid care.

“The Connecticut Home Care Program is a critical first line of defense that helps keep seniors out of nursing homes and allows them to receive care at home – where they want to be,” he said. “Increasing the cost-share will force people off the program or require them to cut recommended services, potentially harming their health.”

Medicaid reimbursement cuts

Enrollment in Medicaid has grown dramatically in the past year; it now covers more than 750,000 people, or one in five Connecticut residents. Finding health care providers who accept the coverage has been a persistent problem, since Medicaid rates tend to be significantly lower than what private insurance and Medicare pay. Many observers worry the problem could get worse with the program’s growth.

Malloy’s plan would preserve increased reimbursement rates for primary care providers, which rose as part of the federal health law. But the plan would cut reimbursement to most other health care providers who treat Medicaid patients, a $107.5 million reduction in payments in the next fiscal year. (Because the federal government reimburses the state for a portion of its Medicaid payments, the state would only save $43 million.)

In addition to a general rate reduction, Malloy’s plan would also cut rates paid to nurses who administer medication, reduce payments to pharmacies and ambulances, and eliminate a year-old pool of money legislators established to help low-cost hospitals with higher-than-average shares of Medicare and Medicaid patients.

Ending plans to improve care for costliest Medicaid clients

Malloy’s plan would eliminate a plan to better coordinate the care of poor seniors and people with disabilities who are covered by both Medicare and Medicaid, and whose care represents nearly half of the state’s total Medicaid spending.

State officials have been working for years to get federal approval of the effort, and in budget documents the Malloy administration acknowledged that the plan “could generate long-term savings.” But the budget proposal calls for ending that effort, eliminating $25.5 million in state funding.

The people who would have been part of the program are among the poorest and sickest state residents. In 2012, just over 57,500 people were eligible for both Medicare and Medicaid, and their care cost more than $3 billion per year. Many are seniors with dementia or younger adults with serious mental illness or developmental disabilities.

Some people in this group would also face new costs for medication under Malloy’s plan. Currently, people eligible for both Medicare and Medicaid and who don’t receive home or community-based care must pay up to $15 per month in co-pays for medications; the state covers the rest of their costs. Malloy’s plan would eliminate the state’s contribution, requiring them to pay their full medication copayments. It would save the state $1.7 million over two years.

An ‘updated’ hospital tax

In 2011, state lawmakers imposed a tax on hospitals, then redistributed the money collected back to hospitals. Doing so allowed the state to qualify for federal matching funds. But since then, the state has been collecting the tax without returning all of the money. Hospital officials had been hoping for the tax to be phased out.

Instead, Malloy proposed increasing the tax, and what hospitals get back. This fiscal year, hospitals will pay $349.1 million and get back $96 million. Under the governor’s plan, hospitals’ payments would rise to $514.4 million. The additional payments – $165.3 million – would be redistributed to hospitals, earning the state an estimated $110 million in federal funding.

Connecticut Hospital Association CEO Jennifer Jackson said the proposal “would endanger hospitals in our state.” She warned that hospitals are already struggling, with jobs being cut and services reduced, affecting patient care and access.

“As this is happening, we face significant proposed legislative unfunded mandates, proposed changes to the regulatory environment that would impede implementation of healthcare reform, and a proposed budget that would exacerbate hospital financial distress,” she said.

Unmet needs for people with developmental disabilities

The Department of Developmental Services would see a slight funding increase, but Barnes acknowledged it’s far from what’s likely to be needed.

The proposal also includes a $19.9 million cut to the department’s voluntary services program, which Barnes called one of the hardest cuts to make. The program, which is budgeted this year for $32.7 million, serves children and adolescents who have significant behavioral health needs; many have autism spectrum disorders or psychiatric disorders, or both. The program is intended to help families care for their children at home.

Leslie Simoes, executive director of The Arc of Connecticut, said she didn’t yet know whether other state agencies would chip in to continue funding those services. “If the goal is to just decimate the program and no longer have it, that would be pretty devastating to families,” she said.

Families of people with developmental and intellectual disabilities have been pushing for increased support in recent years. Advocates say close to 2,000 people are on the waiting list to receive a spot in a group home or other residential services. Because of funding limitations, families say they’ve been told their loved ones might not receive help with residential services until all their living relatives die. And private nonprofit providers that run group homes and other programs for people the department serves say years of flat funding have left them paying low wages that make it difficult to retain skilled workers.

The governor’s proposal didn’t address either issue, said Jennifer Schneider, spokeswoman for SEIU 1199, New England, which represents workers at the agencies.

“We understand Connecticut faces many difficult financial decisions,” she said. “However, today’s proposed budget offers no hope for the over 2,000 individuals with intellectual and developmental disabilities on Connecticut’s waiting list for residential placement services.”

The budget includes more than $40 million over two years to pay for day programs for 99 people and residential services for 110 people who will be aging out of services provided by the Department of Children and Families or local schools.

It also annualizes $4 million used in this year’s budget to provide residential services to 100 people on the waiting list whose caregivers were 70 or older. Simoes said that without annualizing the funding, the department would likely have had to cut other services to maintain residential services for those clients.

Mental health, substance abuse treatment cuts

Providers of mental health and substance abuse treatment will also face close to $20 million in cuts.

In 2013, lawmakers made a $25.5 million reduction in state grants paid to the providers, under the theory that more clients would have insurance once Obamacare rolled out and providers could make up the money by billing their newly insured clients’ coverage.

But the Department of Mental Health and Addiction Services determined that providers would not likely recoup the funds because most clients are covered through Medicaid, which pays such low rates for outpatient services that providers lose money on the care. The department did not implement the cuts, and legislators last year restored the funding (although $5.4 million of it, to be paid through increased Medicaid rates, has not come through because the state has not received the required federal approval).

But Malloy’s budget proposal does not continue that money, effectively putting the 2013 cuts into place.

That would “seriously disabled the adult mental health system,” said Heather Gates, CEO of treatment provider Community Health Resources, which serves 8,000 adults in its outpatient clinics.

And she said the budget as a whole put providers in an “impossible situation,” reducing Medicaid coverage for some adults and cutting grant funds for treatments.

Cuts to public health programs, nursing home residents

Malloy’s proposal would also transfer the cost of several public health initiatives – including AIDS services, breast and cervical cancer detection and treatment, needle exchange and tuberculosis screening and care – to the insurance industry, which pays into a fund that’s used to pay for the Connecticut Insurance Department and the Office of the Healthcare Advocate.

Other cuts include:

• Eliminating the childhood lead poisoning education and outreach program, saving $68,744 per year.
• Reducing funding for school-based health centers, AIDS services and respite and advocacy for children with special health care needs.
• Reducing the amount of income people covered by Medicaid in nursing homes are allowed to keep. Most of their Social Security and other income is used toward the cost of care, but residents are allowed $60 a month for personal needs such as gifts, clothes, haircuts or reading material. Malloy’s plan would reduce it to $50.
• Reducing the amount the state provides for funeral and burial expenses of people who die without the ability to pay. The cut from $1,800 to $1,000 is more in line with surrounding states, according to the administration. The change would save $1.7 million per year.
• Closing the Department of Social Services’ Torrington regional office and removing funding for 28 positions. The staff would fill other vacancies, according to the administration. There are no plans to add workers at DSS, Barnes said.