HARTFORD — The federal health care law is providing both challenges and opportunities for Connecticut lawmakers as they try to reach a state budget compromise with Governor Dannel P. Malloy.
The two-year, $43.8 billion proposal unveiled by the Democratic governor last week includes millions of dollars in health care spending needed to comply with the Affordable Care Act. But it also relies on millions of dollars in savings that the law generates.
The law ‘‘creates a great deal of change in our budget,’’ acknowledged Malloy’s budget chief, Ben Barnes, secretary of the Office of Policy and Management.
Medicaid costs are one of the leading drivers of spending growth in Malloy’s budget, which increases spending by 5.1 percent in the first year and 3.9 percent in the second, Barnes said. About $382 million is spent on caseload growth in human services agencies and changes under the health care law. That includes expanding Medicaid eligibility to more people and increasing Medicaid reimbursements paid to primary care physicians. Although the state must foot the bill up front, it will eventually be reimbursed 100 percent by the federal government.
That reimbursement rate will drop to 90 percent by 2020.
Back in 2010, Connecticut received approval from the federal government to expand Medicaid coverage to an estimated 45,000 low-income adults who had been enrolled in the state’s old program, known as General Assistance. But the number of eligible adults surpassed expectations. By December, 86,870 people had enrolled in the program.
Beginning Jan. 1, 2014, states can further expand eligibility for the program. Connecticut estimates that would add another nearly 60,000 people to the program.
In the meantime, the state is trying to shed some higher-income recipients and transfer them to private insurance plans offered under the new state-based Health Insurance Exchange, created under the federal health care law. Beginning Jan. 1, 2014, people and small businesses will be able to buy coverage through the exchange. State officials estimate that nearly 10 percent of the state’s estimated population of nearly 3.6 million is uninsured and will be required to get insurance or pay a financial penalty.
Jason Madrak, chief marketing officer for the exchange, said those higher-income Medicaid recipients are still poor enough to qualify for some of the heavily subsidized plans that will be offered in the exchange.
‘‘We’re ready as of October to help those individuals, and we look forward to taking on that responsibility,’’ said Madrak, adding that the exchange is planning a large-scale outreach that includes directly contacting those current recipients, but also providing funding to community-based organizations to get the word out about the new insurance offerings.
State officials anticipate that greater access to health insurance under the new Health Insurance Exchange will ultimately reduce how much the state spends on the uninsured.
Malloy’s budget cuts state aid to hospitals by $208.1 million in the first year and $342.4 million in the second year.
‘‘We believe that as the Medicaid expansion and the Affordable Care Act health insurance exchanges are put in place, that the number of uninsured will decrease to 1 or 2 percent within a relatively few short years. The result of it is that the amount of uncompensated care provided by hospitals will dramatically shrink,’’ said Barnes, acknowledging that the Malloy administration is reducing its assistance to hospitals earlier than they will see such changes in the insurance market.
‘‘We’re doing that because we need to reduce spending in the budget,’’ he said, adding the state is still spending $1.6 billion on hospitals despite the cuts.
The state’s acute-care hospitals say the proposal would be financially harmful and urged lawmakers to oppose the cuts.
‘‘The administration has acknowledged that these cuts will hurt hospitals, but that is an understatement,’’ said Jennifer Jackson, president and CEO of the Connecticut Hospital Association, predicting they will cause lasting damage and lead to job cuts at hospitals. “Quite simply, it will devastate them.”
Although the association supports moving Medicaid patients into the Connecticut Health Insurance Exchange, Jackson said it ‘‘must be done in a responsible way, so there is no gap in coverage and so the health care savings achieved from that move is reinvested in the health care system.’’