Even if Virginia decides to expand its Medicaid program, Gov. Bob McDonnell wants a second look in two years before the state would start paying part of the bill.
McDonnell proposed Monday to put a sunset clause on any expansion of the program by the Medicaid Innovation and Reform Commission, created this year to oversee reforms that lawmakers insist be accomplished before — or, some say, at the same time as — expanding the program under the federal Affordable Care Act.
The governor doesn’t favor expanding the program, but his proposal would force what he called “a full evaluation of Medicaid reform efforts and whether Virginia can afford expansion.”
Any expansion would sunset on June 30, 2016, six months before the federal government begins stepping down its financial commitment from 100 percent to 90 percent of the annual bill.
“The goal is to ensure that if an expansion occurs, there is ongoing evaluation of the efficacy of proposed reforms prior to making the expansion more permanent,” explained Tucker Martin, the governor’s communications director.
Legislators who favor expansion say the proposed sunset clause is a new gubernatorial wrinkle on a decision they hope to make long before 2016 to take advantage of almost $5 billion in federal funds in the budget biennium.
“If you don’t figure it out until then, the federal money to support startup will be gone,” said Sen. John Watkins, R-Powhatan, a member of the commission. “We’ll be on our own dime if we wait until then to figure it out.”
A decision isn’t on the agenda for the commission, which will meet today for the last time this year to review progress on ambitious reforms to the shared state and federal program for the poor, elderly and disabled. The panel could authorize expansion by a majority of five members from each chamber.
Medicaid expansion also does not appear to be on the agenda for the General Assembly session that will begin Jan. 8, at least not in the Republican-controlled House of Delegates.
“You’re not going to see any interest in expansion this session,” said Del. S. Chris Jones, R-Suffolk, who will become the next chairman of the House Appropriations Committee. “I’m not sure you’ll see it next session (in 2015).”
Jones said he wants to see the three mandated phases of reforms fully implemented and bearing fiscal fruit in controlling Medicaid costs before expanding the program, even if that means waiting until the three years of 100 percent federal funding expire. “I don’t know if you can get them instituted in a timely enough manner to see if they are working or not in the third year,” Jones said.
The prospect of no expansion concerns advocates for Virginia hospitals, which face significant cuts in state funding under McDonnell’s proposed budget. A proposal to not adjust hospital payments for inflation in the next fiscal year would cost private hospitals more than $34 million in the biennium.
“That’s a big number,” said Katharine M. Webb, senior vice president of the Virginia Hospital and Healthcare Association.
The budget also includes reductions for Virginia Commonwealth University Health System and the University of Virginia Health System — academic medical centers that provide more care for uninsured Virginians and Medicaid recipients than any other hospitals in the state.
VCU will receive $174.5 million in state funds alone in the next two years for indigent care and medical education, while U.Va. will get about $98 million. But those proposed appropriations reflect a reduction of about $15 million in their costs in providing health care to the poor in the year that begins July 1.
They also will lose about $9.3 million in the same fiscal year because the governor wants to delay adjusting reimbursement of Medicaid services for inflation.
McDonnell’s proposed budget includes about $674 million in additional Medicaid spending, reflecting growth in projected enrollment and major state commitments to serving more people with intellectual and developmental disabilities outside of state institutions.
The budget includes $98.5 million to settle a lawsuit with the U.S. Department of Justice to require Virginia to provide necessary care for the intellectually and developmentally disabled in the least restrictive environment, instead of five institutional training centers the state is moving to close or reduce in size.
Most of the spending is for 750 new slots in Medicaid waiver programs that help the state pay for care in community settings, but the waivers also represent some of the most expensive services provided through the program. Moving waivers and other long-term care services to managed care is part of the third and final phase of reforms before the program could expand.
“The governor is proposing to significantly expand funding for that population, which is a high-cost population,” said Sen. Emmett W. Hanger, R-Augusta, chairman of the Medicaid commission. “We need to make sure we’re managing that population with reforms as well.”
Hanger favors Medicaid expansion, but he said he doesn’t intend to force the issue with the commission.
“We’re having meaningful conversations and educating ourselves on the economics of it,” he said.
The economics show that Virginia already has foregone at least $817 million in federal funds in the last half of this fiscal year by not expanding the program on Jan. 1. State Medicaid officials estimate Virginia would forgo an additional $2.3 billion in the fiscal year that begins July 1 and $2.5 billion the following year if the program does not expand in this biennium.
Health advocates say those lost funds don’t include savings in state funds by replacing state dollars with federal funds for serving people with behavioral health problems and prison inmates, as well as reducing state funding for indigent care by hospitals as uninsured patients become eligible for Medicaid.
The Commonwealth Institute for Fiscal Analysis estimates those savings at $135 million a year — the state pegs the savings at $115 million to $119 million in each year of the biennium.
“Denying Virginians access to the health care they need is bad for Virginia’s budget and economy,” said Michael Cassidy, the president of the Richmond-based think-tank.
Gov.-elect Terry McAuliffe built his successful gubernatorial campaign around support for Medicaid expansion, but his staff is reserving judgment on McDonnell’s approach to the idea in the budget.
House Majority Leader M. Kirkland Cox, R-Colonial Heights, said Medicaid expansion is one issue on which he and the new governor will have to disagree.
“I do not see Medicaid expansion,” Cox said Monday. “I was very clear with the governor-elect. I certainly don’t see that happening right now.”
Staff writers Jim Nolan and Olympia Meola contributed to this story.