On November 1, the Department of Medical Assistance Services released the Official Consensus Medicaid Forecast.  Of immediate concern, DMAS has identified a funding shortfall of approximately $87 million in state funds (General Funds) in the current state fiscal year (2018).    It is not yet clear how this shortfall will be addressed; it could be addressed through added appropriation of General Fund revenues or DMAS could be directed to find savings.  Normal savings approaches, such as deferral of or reductions to annual inflation would have limited effect, as the fiscal year will be nearly completed before such reductions could take place.  VHCA-VCAL will be watching the Medicaid budget for 2018 closely as Gov. Terry McAuliffe releases his proposed amendments to the current fiscal year in December.

Gov. McAuliffe will also release a new proposed biennial budget that will cover state fiscal years 2019 and 2020 on December 18.  While the forecast shows a General Fund need over the two years of the biennium of nearly $584 million, it is important to note that this funding need is based on the current appropriation for 2018.  In other words, these two fiscal years have not been previously budgeted, so DMAS assumes the 2018 appropriation as the base.  Adjusting the 2018 appropriation for the aforementioned $87 million shortfall, the 2019 and 2020 General Fund needs equate to annual increases of 2.3% and 2.0%, respectively.  While the dollar figures associated with small percentage changes in Medicaid are large, the growth rates are somewhat modest compared to previous actual expenditure increases.  For example, Medicaid expenditures increased 7.1% from 2016 to 2017, and will increase 7.8% from 2017 to 2018, according to the new forecast. (The percentage change in Medicaid nursing center costs has been much less, however, the implementation of managed care has made this difficult to track year-to-year.)  VHCA-VCAL is closely monitoring the new biennial budget development, which will continue through the 2018 General Assembly Session.  As it stands today, nursing centers are scheduled for inflationary adjustments in fiscal years 2019 and 2020, which we believe are reflected in the forecast. 

One other matter of note in the forecast, DMAS has modeled the impact of continuing the Children’s Health Insurance Program (CHIP) through Medicaid should Congress fail to reauthorize the program.  While CHIP funding does not impact nursing centers directly, the cost to continue the program under Medicaid is estimated to be just under $200 million in General Funds for 2018, 2019, and 2020.  This funding need is not included in the figures quoted above.  Should the governor and General Assembly need to address this issue and decide to fund CHIP in this way, this would be another demand on scarce General Funds.

VHCA-VCAL staff is beginning outreach to policymakers on the budget next week, when staff will meet with the Secretary of Finance to express our members’ Medicaid budget needs.