Surging Medicaid costs and dramatically shrinking federal aid are a recipe for fiscal crisis, state Comptroller Sean Scanlon warned Monday. And while Connecticut’s chief fiscal watchdog didn’t call for changing state budget caps that hamper the General Assembly’s ability to solve the Medic aid dilemma, Scanlon said all solutions need to be reviewed. “I think that every option should be on the table for us as we explore how to make sure that the million or so people who get Medicaid can continue to get that … health care that they need,” Scanlon said during a mid-afternoon online press conference on fiscal and economic trends. “We have an overspending problem,” he said, “and 60% of that overspending right now is happening with Medicaid.” An omnibus federal program run cooperatively with states, Medicaid in Connecticut supports medical and behavioral health services, substance abuse treatment, and nursing home and in-home elder care in Connecticut. The state Department of Social Services’ $3.7 billion line item is one of Connecticut’s largest annual expenses, representing about 14% of the budget’s General Fund. Enhanced federal funding ordered in response to COVID expired in 2023, but Medicaid demand has remained much greater than pre-pandemic levels, leaving Gov. Ned Lamont and the General Assembly struggling to keep costs under control. The social services department overspent its Medicaid budget by almost $160 million two fiscal years ago and by more than $300 million last year, according to the comptroller’s annual reports. Lamont’s budget office already projects more than $110 million in cost overruns this fiscal year. That’s challenging enough, Scanlon said. But President Donald Trump and Congress last July ordered federal Medicaid spending cuts of more than $900 billion nationwide by 2034, with states beginning to feel significant pain by 2028. Analysts here haven’t projected yet how much Connecticut expects to lose, though the hit is expected to be significant. Further complicating matters, Scanlon said, pulling back Medicaid spending would be a huge mistake. “We do need to make bigger investments in the Medicaid program,” he said, adding it would be more harmful — both to patients and to the state’s economy — if residents had less regular access to both primary and specialist care. “It sounds somewhat counter-intuitive, but the more money you spend [up front,] the less money you spend” in the long run, Scanlon said. At first glance, replacing tens or even hundreds of millions of vanishing federal Medicaid dollars each year is not an unsolvable problem in Connecticut. The state has run up unprecedented surpluses topping $1.8 billion, equal to 8% to 9% of the General Fund, since aggressive budget caps were installed in 2017. But Connecticut has used those surpluses to build reserves and whittle down a considerable pension debt that still exceeds $33 billion, according to Lamont’s budget office. And the fiscally moderate governor has been wary of adjusting these caps, despite criticisms from many of his fellow Democrats in the General Assembly’s majority that they divert too much toward debt and weaken health care, education, municipal aid and other core services. In recent years, the legislature and Lamont have underfunded Medicaid, authorizing amounts that ignore clear growth trends in demand rather than using special procedures to override budget caps. Instead, they allow the Medicaid program to operate at a deficit, then cover the cost overrun shortly before the fiscal year ends on June 30, when budget cap rules are more flexible about dealing with crises. “I think that the issue that’s happening right now is less an issue of overspending and more an issue of under budgeting,” the comptroller said, calling on officials “to craft more realistic budgets.” The Lamont administration has been researching options to contain the growth in Medicaid costs, though most of his fellow Democrats in the legislature agree with Scanlon that Medicaid spending needs to grow. “We know we have a Medicaid problem,” said Sen. Cathy Osten, D-Sprague, co-chairwoman of the Appropriations Committee, “and it’s something we’re going to have to address.” But Osten said all state officials must acknowledge the full reality of the situation. Even as the budget caps are limiting spending, federal cutbacks on health care, nutrition and other human service programs likely will push demand for Medicaid-funded services to new heights, she said. Lamont’s budget spokesman, Chris Collibee, said only that the administration would release its next Medicaid funding proposal on Feb. 4 when the governor recommends his budget adjustments for the 2026-27 fiscal year to the legislature. The goal, Collibee added, would be “to enhance affordability and opportunity for all Connecticut residents.” ...read more read less