The state agency overseeing Pennsylvania’s Medicaid and the Supplemental Nutrition Assistance Program faced Republican scrutiny on Wednesday over the size of its budget, which is the largest of any department.
But lawmakers also found common ground during the Senate Appropriations hearing, discussing efforts to reduce potential fraud among the Department of Human Services’ programs and the need to address a crisis driving hospitals to close.
The hearing, which ran more than four-and-a-half-hours total, was part of the General Assembly’s formal budget hearings to analyze the governor’s budget proposal — pitched by Gov. Josh Shapiro earlier this month. Lawmakers often ask partisan questions of agency leaders to use for public messaging throughout budget negotiations.
Shapiro and legislative leaders have until June 30 to negotiate a budget deal, though they rarely hit that deadline and frequently miss it by weeks or even months.
Here are some important takeaways and key moments from Wednesday’s Senate hearing.
‘IMPENDING DISASTER’ FOR RURAL HOSPITALS
Many lawmakers on the Wednesday panel asked Human Services Secretary Valerie Arkoosh about how her office is addressing the ongoing crisis among rural hospitals facing federal budget cuts.
More than two dozen hospitals have closed in Pennsylvania since 2016. And 12 to 14 more could shut their doors without state intervention, according to a study commissioned by the Hospital and Healthsystem Association of Pennsylvania.
Sen. Patty Kim, D-Dauphin, said hospitals in her suburban and urban district are seeing more patients drive long distances from rural areas to seek care because of nearby hospitals closing.
Kim’s concerns were later echoed by Sen. Tim Kearney, D-Delaware, who said rural hospitals are already in the middle of a long-warned “impending disaster.”
Arkoosh said a slice of federal dollars Pennsylvania will receive from the $50 billion Rural Health Transformation Program could be used to alleviate some costs. But she warned that those funds would not be enough to offset the decade-long $20 billion cut to Medicaid under the Trump Administration’s “Big Beautiful Bill.”
“There is going to be very little that we can do if these kinds of funding cuts come into play, unless the state decides to somehow try to backfill some of these cuts,” Arkoosh said. The federal funds, she noted, are prohibited from being used for hospitals’ operating costs.
TACKLING POTENTIAL FRAUD
Sen. Kristin Phillips-Hill, R-York, called attention to legislation she’s backed to pass a state-level False Claims Act, which would crack down on fraudulent spending by incentivizing whistleblowers to go public. It would mirror an identical federal policy.
Similar proposals have lingered in the state Capitol for decades. Proponents, including Shapiro, a Democrat, say it could recover more state dollars before they’re lost.
Arkoosh said during the hearing that her department did not have an estimate of the potential amount of money saved if the False Claims Act were adopted.
But she pointed to data published last week showing Pennsylvania’s payment error rates were lower than the national averages last year. Medicaid, for example, saw a 0.26% payment error rate compared to the national 6.12% rate. A payment error includes both underpayments and overpayments and is not a direct measure of fraud.
“We welcome all tools to help reduce fraud in our programs,” Arkoosh said about the proposed False Claims Act, adding that most fraud that did exist was done by providers.
Philadelphia and Allegheny County have their own false claims laws, but the rest of Pennsylvania lacks such a policy at the state level.
SHAKY FEDERAL GROUND
Arkoosh said that the addition of work requirements and other changes to Medicaid and SNAP adopted last year by President Donald Trump and the Republican-led Congress, in what is commonly called the “One Big Beautiful Bill,” are driving Pennsylvanians to lose access to health care and food aid.
That legislation, Arkoosh said, has directly driven 59,000 Pennsylvanians off SNAP.
She also said that beginning in 2027, the more than 750,000 Pennsylvanians eligible for extensions to the Affordable Care Act will need to re-determine their eligibility every six months and must meet work requirements.
“We know from other states that have tried to impose these requirements, historically, that most of the people that end up losing their benefits are actually still eligible for the benefit,” Arkoosh said. “They’re meeting the requirements, but they get caught up in the red tape on how to report those requirements.”
Arkoosh said her office is working on online tools to help alleviate some of the issues that some enrollees may face while filling out their documents. But already, Arkoosh said, somewhere between 90,000 and 100,000 people in Pennsylvania have given up their Medicaid plans because they can no longer afford coverage.
NOT ADDING UP
Senate Appropriations Chair Scott Martin, R-Lancaster, is among the most vocal lawmakers critical of Shapiro’s budget pitch to pull $4.6 billion from Pennsylvania’s reserves to offset a spending deficit.
Martin noted that the Human Services Department has consistently underpredicted its annual increase in spending since 2014, creating a $7 billion gap between its predictions and actual expenses in that time period.
“Why is that?” Martin said. “As we look at projections … why the underestimating of spending?”
Gloria Gilligan, director of fiscal management at the human services agency’s Office of the Budget, said “uncertainty” in federal funding makes it “unrealistic” to predict that spending will grow at the same rate as prior years.