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Governor Shapiro’s Proposed 2025-26 Budget Includes Key Medicaid & Health Investments

Kyle Fisher

Last month, Governor Shapiro unveiled his $51.4 billion budget proposal for Fiscal Year 2025-26. The proposal, which represents a 7.4% increase over last year’s budget, includes certain new health initiatives like reentry supports for people leaving incarceration, as well as investments to keep rural hospitals open, workforce initiatives to educate and recruit nurses, and increased funding for behavioral health services and walk-in mental health crisis centers.  

Of the overall proposed state budget of $51.4 billion, the Department of Human Services (DHS) makes up $21.17 billion and includes $7.13 billion in long term care, $6.4 billion in Medicaid/health care delivery, and $3.23 billion in intellectual disability/autism services, among other investments.

source pennsylvania department of human services 1

Health-related initiatives included in the governor’s proposal include:

  • Restricting Coverage Criteria for Weight Loss Medications – citing a projected Medicaid cost of nearly $1 billion in the coming fiscal year for GLP-1 receptor agonists, the Governor intends reduce this spend by limiting Medicaid’s coverage of these medications when used to treat obesity.  (Their use for treatment of diabetes will not be changed.)  Proposed changes will go through the normal public notice and comment process with the DHS Drug Utilization Review board. 
     
  • Reentry Supports for Incarcerated Individuals – $15.7 million (including $4.8 million in state general funds) to ensure seamless MA coverage – and to avoid lapses in pharmacy or SUD treatment coverage, for example – for individuals re-entering the community.  The Governor proposes to phase in the components of the recently approved “Keystones of Health” Section 1115 waiver demonstration, beginning with re-entry supports. 
     
  • Increasing Payment Rates for Self-Directed Care Workers  – $45.5 million (including $20 million in state funds) is provided to increase direct care worker reimbursement rates in the participant-directed model in Community HealthChoices.  Roughly 8,500 CHC participants use Tempus and participant-direction to staff their Personal Assistance Services (PAS).  Far more participants use the agency-based model, with their PAS staffed by a home health agency. 
     
  • Maintaining Access to Hospitals - $35.1 million (including $10 million in state general funds) in supplemental payments for hospitals statewide and an additional $35.1 million ($10 million in state general funds) to support rural hospitals.   
     
  • Expanding County-Level Mental Health Services – $20 million is provided to improve county-based infrastructure for providing mental health services and substance use disorder treatment. 
     
  • Supporting the 988 Suicide & Crisis Lifeline – $10 million is provided to sustain operations and capacity for the 988 Lifeline and enhance crisis intervention services.  Another $5 million is provided to establish and maintain walk-in mental health crisis stabilization centers.
     

For more information on the proposed state budget, visit the Governor’s official website. A recording of the Department of Human Services budget briefing is available here, and the DHS Executive Budget (“Blue Book”) can be found here.