After watching his predecessor, Gov. Dannel P. Malloy, spar with Connecticut’s hospitals for much of the past eight years, Gov. Ned Lamont got off to a rough start with the industry himself on Wednesday.
Lamont’s new budget canceled a previously approved tax cut for hospitals, replacing it with an effective tax hike of about $43 million per year.
The governor set aggressive goals to cut state health care costs, flat-funded social services and nursing homes, and created a new asset test for a health care assistance program for seniors.
Lamont also used his budget to reaffirm his support for a paid family and medical leave system, a new 75 percent tax on electronic cigarettes, and a minimum age of 21 to purchase cigarettes and vaping products.
“We are developing a budget that will put the state’s finances on a stable trajectory over the biennium and into the future,” Chris McClure, spokesman for the governor’s budget office, said earlier this month in response to the hospital tax issue. “Disruption of recurring revenue sources, such as the current hospital tax arrangement, creates additional challenges to meeting this goal.”
After two years of paying $900 million annually in state provider tax, hospitals were supposed to get big relief next fiscal year, with the tax dropping to $384 million.
The industry currently gets $496 million in supplemental payments back from Connecticut as part of a complicated arrangement to leverage more federal Medicaid dollars for the state. It was supposed to see those payments decline as well, down to $166.5 million per year.
Still, that meant the instead of a net annual loss of $404 million, hospitals only would lose $217.5 million.
But Lamont, who is trying to avert a potential deficit of $3.5 billion over the next two fiscal years combined, said Connecticut could not afford that relief right now.
Lamont’s budget, however, would freeze the tax at the current $900 million-per-year and give the industry back $453 million — $43 million less than it receives now. That would leave hospitals out $447 million annually.
The Connecticut Hospital Association denounced the plan Wednesday.
“We are strongly opposed to the proposed budget. The current administration is not honoring the bipartisan agreement for this year or next year, and the budget makes additional cuts to hospitals,” said Jennifer Jackson, CEO of CHA. “We continue to be willing partners to find a sustainable solution, but this is not it.”
Hospitals have been suing the state since 2015, arguing Connecticut’s budgetary policies begun under Gov. Dannel P. Malloy’s administration violate federal Medicaid rules. That case is still pending.
And the industry also recently charged that Connecticut short-changed hospitals by millions of dollars this year in exchange for care provided to Medicaid patients and to the under-insured.
House Minority Leader Themis Klarides, R-Derby, expressed concern over the governor’s hospital tax plan.
“Just because this is where they are now doesn’t mean this is where we will end up,” Klarides said. “Hospitals are the people that take care of us and our family and our loved ones and most of them are nonprofit and they are fighting every day to keep their doors open.”
Cutting health care costs for state workers and retirees
The governor’s budget also aims to significantly reduce the cost of providing health care to state workers as well as retirees — about $50 million in the first year of the plan and $135 million in the second.
Costs of providing care to these groups, which total about 97,000 people, are projected to rise $235 million over the next two fiscal years if adjustments aren’t made.
But the administration also says costs for the same treatment or service still vary too much from one provider to another. For example, the governor’s budget narrative states, the average cost of a knee replacement ranges from $24,000 to $50,000.
Comptroller Kevin P. Lembo “and our team are working with our state employees to forge a path where the state no longer pays whatever a healthcare provider charges, but instead sets a ceiling on the maximum price the state will pay,” the governor said in his budget address. “There is no correlation between quality care and cost — and the cost is all over the map.”
More dollars for social services — but not for providers
The governor’s budget invests new funds in social services to cover increasing demand, but doesn’t bolster rates for the community-based agencies that provide many of these services.
The package includes $46.2 million in new funding over the biennium to support increased caseloads at the Department of Developmental Services.
Lamont also recommended funding for 70 new supportive housing units for the people with intellectual disabilities and autism spectrum disorders.
But while the plan doesn’t increase payments to most private, nonprofit agencies, it does preserve increases built into the current fiscal year. These include minimum wage increases and a 5 percent cost-of-living adjustment for nonprofits working with the developmentally disabled.
Nonprofits contracting with other state agencies got a 1 percent rate increase this fiscal year — but were mandated to invest all of that money to raise worker pay.
Gian-Carl Casa, president and CEO of the CT Community Nonprofit Alliance, praised Lamont “for mostly protecting community services and programs that serve people with developmental disabilities, treat substance abuse and mental illness, house the homeless, and provide arts and cultural programs that improve our quality of life.”
But Casa added that “in order to pay for the true cost of providing community services after years of deep budget cuts, there is more work to do.”
No inflationary increases for nursing homes
Lamont opted not to include a projected $90 million in rate increases for nursing homes to cover inflation.
Though this has been done before, the leader of the state’s largest nursing home coalition said the industry is under increasing financial pressure due to economic forces.
Flat state funding only exacerbates the problem, said Matthew V. Barrett, President and CEO, of the Connecticut Association of Health Care Facilities.
“Nursing home inflationary rate increases are needed now more than ever due to the significantly higher costs nursing homes will inevitably experience as the minimum wage increases to $15, and is layered on top of the tremendous upward pressure on wages already present in the health care system because of very low unemployment and in collective bargaining process,” Barrett said.
“Connecticut nursing homes can’t increase their prices to mitigate the increased costs. This is why it’s essential that Medicaid funding be increased to reflect the certainty of higher labor costs,” he added.
Medicare Savings Program survives — with an asset test
One of the most popular social services programs among legislators — one that nonetheless was at risk of deep cuts — survives in the Lamont budget. But Lamont would establish a new asset test to determine eligibility for the Medicare Savings Program, which uses Medicaid dollars to help seniors cover medication and other health care costs.
More than 110,000 patients were projected to lose assistance last year after lawmakers tightened eligibility to save $90 million annually. But while legislators reversed themselves and canceled the tighter eligibility rules at the last minute last spring, they never identified the funding to continue the program over the long-term.
Under the governor’s proposal, Connecticut will save $10.5 million per year starting in mid-2020 by joining 40 other states with an asset test. Individuals with assets worth more than $7,560 and couples with more than $11,340 — exempting their homes, one car per household, a burial plot and the first $1,500 in savings — would be ineligible for the program.
Nora Duncan, state director for the Connecticut AARP, said the Medicare Savings Program has been critical in keeping low- and middle-income seniors healthy and Lamont’s proposal “does raise eyebrows.”
“AARP opposes asset testing and given our very high cost of living and efforts to reduce prescription drug costs for everyone, we need to carefully analyze the impact on older Connecticut residents who we know are often already struggling to stay in their homes and communities,” Duncan said.