State Budget Update

Virginia General Assembly

As they do every year, the House Appropriations and Senate Finance committees met on Sunday to present their budget amendments to Virginia's current two-year, $86 billion budget.  In addition to previewing what House and Senate budget negotiators will discuss in the final weeks of the legislative session, the presentation of the two money committee reports serve as a reminder of the political strains in the Senate that could hamper future budget action.

For nursing facilities, the news is positive.  Rate adjustments approved last year as a part of the two-year budgeting process remain in effect for state fiscal year 2014 which will begin in July.  An inflation adjustment of 2.2% will be applied for Medicaid dates of service on or after July 1, 2013.  This update factor applies to both rate and cost ceiling calculations.  Additionally, our pursuit of relief from the current minimum occupancy provision continues to garner support by members of the two committees.  As introduced at VHCA’s request by the Governor in December, an amendment to reduce the current 90% threshold applied to both Medicaid indirect and capital cost components to 88% effective July 1st of this year remains in the budgets now before both chambers.  Additionally, the Senate reported a language amendment to study the implication of full elimination of the occupancy provision.

Democratic senators on the Finance Committee voted against the Senate budget bill, which passed on a 10-5 party-line vote while the vote on the House bill in Appropriations was unanimous.  Their stated objection is Senate budget language to delay Medicaid expansion pending approval for federal waivers to allow a series of program reforms.  States have a Medicaid expansion option as a result of the 2012 U.S. Supreme Court’s decision that left that choice to states, killing a provision of the law that sought to require state program expansion under a threat of lost funding.  Governor Bob McDonnell and some Republican legislators have withheld their support for Medicaid expansion despite promises from the federal government to fund 90% of the cost of expansion.

There is growing interest within both houses of the General Assembly to seek approval for a federal waiver to allow the Commonwealth to pursue cost-controlling reforms before approval is given for Medicaid expansion.  Under House amendments announced on Sunday, language stipulates that Virginia could pull back from expansion in future years should federal funding allocations shift to require a higher proportion of state funds.  While the language amendments to the budget unveiled this week lack specificity with regard to reforms under consideration, there is strong interest in moving the Commonwealth toward statewide implementation of Medicaid managed care for all populations – despite the fact that Virginia’s proposed three-year Dual Demonstration has yet to be approved by the Centers for Medicare and Medicaid Services.   

Today, both chambers will take up and act upon their respective budgets.  Given the 20-20 party split in the makeup of the Senate, the outcome of actions in the upper chamber is uncertain.  Looking beyond today’s approvals, we should see the naming of budget conferees by the middle of next week.  The budget conference committee will work to craft a compromise budget that can be approved by both chambers no later than February 23rd, the scheduled end of the session.