Wisconsin’s Medicaid budget is $322 million short. Racine County is seeing one reason why

Originally published by Racine County Eye.

Overview:

Wisconsin's Medicaid program is projected to spend $322.4 million more in state dollars than lawmakers budgeted for 2025-27, according to the Department of Health Services' June 30 projection. The gap has more than doubled since September 2025.

The biggest overruns are prescription drugs ($99.1 million), nursing homes ($78 million), federally qualified health centers ($58 million) and Children's Long-Term Support ($56.9 million).

In Racine County, 984 children were enrolled in Children's Long-Term Support in July, up 19% from February 2025.

The shortfall does not automatically cut eligibility or benefits, and no provider payment delays have been announced. DHS said, "Services will not be affected." Lawmakers decide how the gap is closed before the budget ends June 30, 2027.

RACINE — Nearly 1,000 Racine County children are enrolled in a Medicaid program whose costs are rising faster than Wisconsin budgeted, offering a local view of one pressure behind the state’s projected $322.4 million Medicaid shortfall.

State data show 984 Racine County children were enrolled in the Children’s Long-Term Support Program in July, up from 826 in February 2025 — a 19% increase in 17 months. Sixteen more children were eligible but not yet enrolled. Racine County averaged 64 days from referral to enrollment, compared with 54 days statewide and a 90-day state benchmark, according to the Wisconsin Department of Health Services enrollment dashboard.

Hope Otto, Racine County’s human services director, said the county receives about 20 to 30 referrals to the program each month.

“The demand could be described as steadily rising,” she said. Her message to families: “I would want families to know to continue to reach out for services and do not let any potential funding challenges at the State level discourage you from seeking help.”

The state’s projected Medicaid shortfall has more than doubled in less than a year, rising from $144.1 million in September 2025 to $322.4 million in the state’s June 30 projection. Wisconsin has not said how it will close it, leaving lawmakers, health care providers and families waiting for an answer.

The shortfall does not automatically cut Medicaid eligibility or benefits, and state and local officials have not announced delayed payments to providers. It is a projection that the program will spend $322.4 million more in state tax dollars than lawmakers set aside for the 2025-27 budget.

More than 45,000 Racine County residents receive Medicaid coverage, including children, older adults, people with disabilities and low-income workers.

The shortfall grew every quarter

DHS first projected a $144.1 million shortfall in September 2025. The estimate grew to $213.2 million in December, $263.5 million in March and $322.4 million in June, according to the department’s quarterly reports and a July 7 memo from the nonpartisan Legislative Fiscal Bureau.

The largest projected overruns are concentrated in services, not in a broad surge in Medicaid enrollment:

• Prescription drugs, after rebates: $99.1 million over budget (15.4%).
• Nursing homes: $78 million over budget (10.2%).
• Federally qualified health centers: $58 million over budget (27.1%).
• Children’s Long-Term Support: $56.9 million over budget (19.3%).
• Family Care and related long-term care programs: $35.3 million over budget (1.3%).

DHS told lawmakers in March that Children’s Long-Term Support served more than 29,800 children statewide in February. The department projected enrollment would grow 18% during the biennium, compared with the 14% growth assumed in the state budget. By July, statewide enrollment had reached 31,610.

The program helps children with disabilities and their families obtain services that allow them to remain at home and participate in their communities. Wisconsin eliminated the program’s waiting list over several state budgets, making it an open-entry program. The result is more children receiving services, but also costs that outpaced the budget’s enrollment assumptions.

In its March report, DHS attributed the pharmacy overrun partly to lower drug rebates. The rebate share fell from 68% in 2021 to 57% in 2025, below the 60.9% built into the state budget. DHS attributed about $11.4 million of the March overrun to that decline and about $50.8 million to higher drug prices and use. By June, the projected pharmacy overrun had grown to $99.1 million. DHS said this week that the costs above budget are “mostly attributable to higher gross expenditures,” with the falling rebate share “a substantial contributor as well,” and that cost growth spans many kinds of drugs and “is not driven by one or a few categories.”

DHS said recent state budgets also increased nursing home reimbursement by more than $500 million in state and federal funds. The department said those increases slowed facility closures and contributed to Medicaid-paid nursing home bed days growing for the first time in decades.

Federally qualified health center spending is also running $58 million over budget statewide. DHS said those costs are growing faster than the budget assumed “due to a combination of patients using more FQHC services and FQHCs providing more complex or intensive services.” Racine has gained two such clinics since July 2025: Pillar Health’s clinic inside Julian Thomas Elementary and Racine Outreach Community Health Centers on the Ascension All Saints campus. DHS did not say how much of the statewide overrun, if any, is due to new clinics.

At Pillar Health’s Racine clinic, daily patient volume has been on a “steady incline” since it opened in July 2025, Mary Ouimet, Pillar Health’s chief executive officer, said in a written response. This month is projected to be the clinic’s busiest yet, with more than 260 visits. Its Medicaid share has held at 46%, and 27% of its patients pay for care themselves, the highest self-pay rate of any Pillar site.

Ouimet disputed the idea that health centers are driving the shortfall.

“While there is a notable increase in Community Health Center (CHC) spending, CHCs account for a very small portion of the overall Medicaid budget and are not a primary driver,” she said.

More patients getting primary care at health centers means problems are treated earlier, likely avoiding costlier emergency care, she said.

The budget itself is part of the story

Not all of the projected gap was due to unexpected cost growth. When lawmakers wrote the 2025-27 budget, they funded Medicaid $50 million a year in state dollars below the Fiscal Bureau’s estimate of what continuing current services would cost. The bureau called it an “unspecified funding reduction” totaling $100 million over two years, with no corresponding program change identified.

DHS told the Legislature’s Joint Finance Committee in December that lower-than-expected enrollment in BadgerCare Plus and Supplemental Security Income managed care had absorbed that $100 million savings assumption. But the original reduction matters because it shows the shortfall is not solely a story of services suddenly becoming more expensive. It is also about the assumptions lawmakers used when they built the budget.

Racine County Eye asked Joint Finance Committee co-chairs Rep. Mark Born and Sen. Howard Marklein who proposed the reduction, what savings lawmakers expected and whether they plan to pursue a budget adjustment. As of Wednesday afternoon, neither had responded.

Who decides how the gap is closed

DHS runs Medicaid, but the Fiscal Bureau said its options for significant spending cuts are “somewhat limited” because eligibility and benefits are governed by state and federal law and by Wisconsin’s Medicaid plan.

The department may have some ability to modify or delay payments to health care providers and managed care organizations, the bureau wrote, but such steps would carry “negative consequences” and might not fully close the gap. Asked whether it is considering payment changes or delays, DHS said it will “continue to take all reasonable measures to ensure the program is managed cost-effectively while maintaining access to quality health care,” adding, “We don’t have further specifics to share at this time.”

“As for any delays in payments to providers, I haven’t heard anything about this and there have been no discussions about this from the state,” Otto said.

Pillar Health has not been notified of any payment changes either.

“Any delay in payments would be a great concern for CHCs, including Pillar Health, and any other health care entity that serves Medicaid patients, but at this time we have not been notified by DHS that any such action is forthcoming,” Ouimet said.

Ascension Wisconsin acknowledged Racine County Eye’s questions about what delayed Medicaid payments could mean for Ascension All Saints Hospital. Mo Moorman, the system’s senior director of external relations, said gathering answers from several subject-matter experts by Racine County Eye’s deadline might not be possible.

Hospitals were already under strain before the shortfall.

“Wisconsin hospitals were already not being reimbursed at the level that they need to support their health care services,” Christian Moran, senior vice president of finance and payment for the Wisconsin Hospital Association, told Racine County Eye in July. The association estimates Wisconsin hospitals absorbed about $1.4 billion in unpaid Medicaid costs in 2024. Moran said the hospital assessment increase in the current state budget would cut those losses roughly in half.

The Legislature could pass a budget adjustment before the two-year budget ends June 30, 2027. In January, the Fiscal Bureau projected the state’s general fund would end that period with about $2.37 billion. That projection did not count the Medicaid shortfall, then estimated at $213.2 million, “because of the uncertainty of the fiscal impact,” the bureau wrote. Whether to use that money to close the gap is up to lawmakers.

What this means for Racine County residents

For now, the $322.4 million figure is a warning about the state budget, not notice that anyone has lost coverage or that a provider payment will arrive late. When asked what Racine and Kenosha County residents should know, the Department of Health Services said, “Services will not be affected.”

Families can still apply for Children’s Long-Term Support, and Otto said they should continue seeking help.

DHS confirmed that $322.4 million remains its most recent projection and said it sends the reports to the Joint Finance Committee at the end of each quarter, so a new estimate is due around Sept. 30. Racine County Eye will check the new estimate, any proposed payment changes, and any action by lawmakers.

This story builds on Racine County Eye’s coverage of Wisconsin’s new Medicaid work requirement. The work requirement is a separate federal policy taking effect in 2027 and is not the cause of the current state budget shortfall.