States are absorbing substantial increases in healthcare costs for the poor, as they realize that the people remaining on Medicaid rolls after the COVID-19 pandemic are sicker than anticipated and costlier to care for. In Pennsylvania, state budget makers recently unveiled the scale of that miscalculation, with Democratic Gov. Josh Shapiro proposing an increase of $2.5 billion in Medicaid spending in the next fiscal year. That amounts to a roughly 5% increase in overall state spending, mostly driven by the cost-to-care for unexpectedly sick people remaining on the state’s Medicaid rolls. Costs went up partly because some people put off medical treatment during the pandemic, Shapiro’s administration said. As a result, their conditions worsened and became costlier to treat. The Alliance of Community Health Plans last fall asked the federal government to review Medicaid reimbursement rates in Pennsylvania and a handful of other states that it said were unrealistically low and relying on outdated claims data that showed a relatively healthier population of Medicaid enrollees. In Pennsylvania, the $2.5 billion projected Medicaid cost increase will be a big pill to swallow in a state with a slow-growing economy and a shrinking workforce that is delivering relatively meager gains in tax collections. Tax collections are projected to rise by less than $800 million in the 2025-26 fiscal year, and Republican lawmakers are wary about spending down the state’s roughly $10.5 billion surplus for fear of depleting it within a few years.
