2.25.26 Senate DHS Budget Hearing: part 2

Pennsylvania Department of Human Services Budget Hearing – Part 2 Overview

Part 2 of the Senate DHS budget hearing focused heavily on long-term care, workforce shortages, intellectual disability services, federal match issues, childcare workforce stabilization, and administrative capacity. Lawmakers pressed the department on structural sustainability challenges, while DHS leadership emphasized demographic shifts, community-based care preferences, and federal regulatory constraints.

Below is a comprehensive issue-by-issue breakdown of the discussion, including legislator questions and agency responses.

1. Nursing Facility Closures & Private Equity Concerns

Legislative Concern

Senators raised concerns about:

• Continued closures of skilled nursing facilities.
• Workforce instability.
• The growing role of private equity ownership in long-term care.
• Predictable quality declines following private equity acquisitions

Legislators referenced legislation passed in the House addressing private equity involvement and urged Senate consideration.

DHS Response

Secretary Arkoosh acknowledged concerns about ownership trends and quality outcomes. She noted:

• Patterns have emerged in some private equity acquisitions involving consolidation of facilities.
• Quality shifts often follow ownership changes.
• DHS is monitoring these developments closely.

However, DHS emphasized a broader structural reality:

• A strong and consistent preference among participants to age in place.
• When offered transition opportunities from nursing facilities to community-based settings, individuals overwhelmingly choose to return to the community

Key Policy Framing: DHS views the shift toward home- and community-based services (HCBS) as consistent with participant preference and long-term system design.

2. Stabilizing Skilled Nursing Workforce

Legislative Question (Senator Culver)

With Pennsylvania’s aging population and more facilities closing than opening, what is DHS doing to stabilize skilled nursing care in the Commonwealth?

DHS Response

Secretary Arkoosh candidly stated that stabilizing the nursing facility workforce is not currently a top DHS priority compared to expanding community-based care

The department’s position:

• Participants strongly prefer community-based alternatives.
• Policy direction has focused on expanding HCBS capacity rather than preserving institutional volume.
• Workforce issues are deeply tied to broader healthcare labor shortages.

This exchange highlighted a philosophical divide:
Legislators focused on maintaining facility capacity; DHS emphasized system transformation toward community living.

3. Office of Long-Term Living (OLTL) & Residential Habilitation Rates

Legislative Concern (Senator Carney)

Residential habilitation providers have not received rate increases since 2010. Accountability appears unclear between OLTL and Community HealthChoices (CHC) managed care organizations. How can this be resolved?

DHS Response

DHS acknowledged the frustration and complexity of the issue, describing it as a longstanding tension between:

• Managed care rate structures.
• OLTL oversight.
• Provider sustainability concerns.

The department indicated continued engagement but did not commit to a specific rate adjustment proposal during the hearing.

Implication: Rate adequacy for long-term services remains unresolved and may require legislative budget intervention.

4. Workers with Job Success & Federal Match Issues

Legislative Question (Senator Vogel)

Did DHS reapply for federal financial participation for the Workers with Job Success component of the Medical Assistance for Workers with Disabilities (MAWD) program?

DHS Response

• DHS did reapply.
• Federal match was denied due to structural issues in program design
• The Workers with Job Success component cannot impose different requirements than the broader MAWD program.
• DHS plans to formally request reconsideration under updated fiscal code language.
• The department is not optimistic that federal approval will change.

Fiscal Impact: Loss of anticipated federal match limits revenue flexibility in the MAWD program.

5. Budget Deficit & Available Funds

Legislative Question

Is DHS expecting any excess funds that could help offset the projected budget deficit?

DHS Response

DHS indicated:

• Funds currently being held (via 3103 waiver authority) are earmarked for specific purposes.
• The department continues monitoring year-end spending.
• No commitment was made regarding surplus availability

Theme: Limited near-term fiscal flexibility within DHS appropriations.

6. Office of Developmental Programs (ODP) & ID Waiver Waiting List

Legislative Question

The proposed budget includes a $76.8 million increase for the ODP Community Waiver Program.

• $30 million is designated to serve:
  • 400 additional individuals under the Consolidated Waiver.
  • 850 additional individuals under the Community Living Waiver.
• As of November 2025, 7,203 adults remained on the waiting list.

How will the remaining $46.8 million be allocated?

DHS Response:

The remaining funds address:

• Changes in service utilization patterns.
• Increased cost intensity per participant.
• Ongoing demographic and medical complexity trends.
• Rate adjustments and cost growth within existing waivers.

DHS referred legislators to detailed explanations in the DHS “Blue Book.”

Key Tension: While waiver expansion is occurring, growth in utilization and complexity continues to outpace full elimination of the waiting list.

7. Childcare Recruitment & Retention Grants

Legislative Question (Senator Cappelletti)

Last year’s budget included $25 million for childcare recruitment and retention bonuses; this year proposes $35 million. What challenges have emerged in implementation?

DHS Response:

• Continued workforce instability in the childcare sector.
• Bonus implementation mechanisms.
• Administrative complexity in distribution.
• Recruitment challenges tied to wage competition.

The department framed bonuses as stabilization tools but acknowledged broader workforce shortages remain a structural issue.

8. Bureau of Hearings & Appeals (BHA) Capacity

Legislative Concern

If courts require full merits hearings before placement on the child abuse registry, what would be the impact?

DHS Response

• Pre-deprivation hearings currently average approximately 2.5 hours each.
• A ruling requiring full merits hearings could add over 4,000 hearings annually.
• BHA currently has a complement ceiling of 1,060 positions.
• 16 new positions were authorized in the FY 2025–26 budget for Medicaid-related work.
• Hiring was delayed due to the state budget impasse.

Implication: Judicial decisions could significantly increase administrative workload and require additional staffing.

9. Gender Dysphoria & Coverage Clarification

Early in the session, discussion referenced whether individuals carried diagnoses of gender dysphoria and whether certain procedures were being performed

The Chairman redirected the discussion, suggesting broader policy issues should be handled in a dedicated oversight hearing.

Note: No major policy shift or program change was announced during this exchange.

Key Themes Emerging from Part 2

1. Long-Term Care System Transformation

DHS continues shifting policy focus toward home- and community-based care, even as legislators express concern about facility closures.

2. Structural Workforce Shortages

Whether nursing facilities, habilitation providers, or childcare centers, workforce shortages are systemic and not limited to any single program.

3. Federal Constraints Limit State Flexibility

From MAWD federal match denial to court-driven hearing requirements, federal decisions continue shaping DHS fiscal realities.

4. Waiver Expansion vs. Growing Demand

ID waiver funding increases are meaningful but insufficient to fully address long waiting lists.

5. Limited Fiscal Cushion

DHS signaled constrained ability to redirect funds to close projected deficits.

Conclusion

Part 2 of the DHS budget hearing highlighted the tension between:

• Institutional stability and community-based transformation.
• Legislative concern over provider sustainability and demographic pressures.
• DHS emphasis on participant choice and long-term care modernization.
• Federal regulatory constraints limiting revenue opportunities.

As budget negotiations advance, debates will likely center on:

• Rate adequacy for long-term providers.
• Nursing facility sustainability.
• Waiver expansion funding.
• Workforce stabilization.
• Administrative capacity in response to court or federal changes.