Delaware’s Medicaid program is requesting a 7.7% budget increase for inflation and growth needs but braces for the possibility of federal funding cuts.
While Delaware’s Medicaid program has completed the unwinding process following record-high enrollment during the COVID-19 public health emergency, more dollars are still needed to reflect federal matching rate changes, as well as increases in managed care organization's pricing.
Delaware Division of Medicaid and Medical Assistance (DMMA) Director Andrew Wilson is requesting $85.5 million to cover these costs, which would bring the total state Medicaid spend to almost $1.2 billion.
The federal government currently covers 60% of Medicaid costs in Delaware, and while legally that share cannot dip below 50%, the Trump administration is looking at changing that floor along with other drastic funding cuts.
“Congress is considering a slate of measures and changes to the program ranging from the fairly benign to an existential shift. While we're preparing for what we consider some of the more likely policies, the signals from the federal government have not been clear. As we do with the implementation of the tax, we encourage caution until the federal reconciliation process is complete," Wilson told the Joint Finance Committee (JFC).
The tax Wilson is referring to is Delaware's newly passed Hospital Provider Tax, also known as the Protect Medicaid Act of 2024, which officially goes into effect July 1, 2025.
Wilson estimates the new tax could bring in $40 million for the next fiscal year. Pending federal approval, that money would be reinvested into the Medicaid program with the ability to leverage federal funding as available.
The sponsor of the Protect Medicaid Act, former State Senator and now Congresswoman Sarah McBride, estimated the new tax could bring in over $100 million in federal funding.
But Wilson says Congress is looking over two proposals that change both the collection of taxes — like the Hospital Provider Tax — and "seriously restricts their expenditure."
Wilson encourages JFC to take caution in relying on these funds until federal actions are resolved.
He says policies under the Biden administration liberalized Medicaid eligibility, and while the Trump administration’s proposals would restrict eligibility, those changes would not necessarily equate to savings for Delaware.
“While repealing rules from the previous administration would be an implementation cost saver, most other proposals would be a cost shift to the state with various magnitudes of impact," he explained.
Some of the proposals of concerns include reducing the federal program share requirement (FMAP) below 50%, instituting per capita caps on enrollment growth and growth rates tied to medical inflation, imposing new limits on necessary authorities and lowering payment rate approvability, introducing FMAP penalties to states offering Medicaid coverage to undocumented immigrants or completely barring spending on undocumented populations all together.
A new study from the Robert Wood Johnson Foundation found that if Trump’s proposed federal funding cuts were implemented, Delaware would need to increase its Medicaid spend by 22.6%.
States would likely have to reduce Medicaid eligibility to make up for shortfalls in federal funding because their ability to cut Medicaid spending in other ways, such as reducing already low provider payment rates, is limited.
If states eliminated their existing Medicaid expansion programs because of the loss of federal support, researchers say nearly 16 million people would lose Medicaid coverage.
The study estimates the uninsured population in Delaware if Medicaid expansion were to be reversed could increase by 58.6%.
As of August 2024, there are 270,248 people enrolled in Medicaid in Delaware — 19% of Delaware's entire population is either enrolled in Medicaid or Children's Health Insurance Program.
In Delaware, Medicaid covers 1 in 6 adults ages 19-64, 3 in 8 children, and 3 in 5 nursing home residents.
The $85.5 billion request is the highest door opener for the entire state budget for fiscal year 2026, followed by a $75.5 million request for educator salary increases.
Health and social services as a whole is the second highest spend for the First State, making up 26.8% of the operating budget. Public education is the state's highest spend at 36%.
JFC is holding its last budget hearing of the year on March 4.
