Governor Introduces Biennium Budget

VHCA (12/20/2007)

On Monday, December 17th, Governor Kaine introduced his two-year budget proposal that increases state spending on education, health care and other core government programs.  The spending plan totals $78 billion for state fiscal 2009 and 2010 and allows for modest progress on some of the Governor’s priorities. The Governor’s proposal relies on two billion dollars in borrowing and does not raise taxes.

As anticipated, the Governor wants to include additional spending of nearly $100 million for the state's mental health system, whose serious weaknesses were exposed this year by the tragedy at Virginia Tech.  In other health care and education initiatives, the Governor is proposing to spend an additional $25 million over two years on programs that subsidize health insurance for the uninsured. 

In order to fund his spending plan, the Governor proposes to divert $261 million, the most allowed under the law, from the state's “rainy day” reserve fund and to redirect $180 million temporarily from highway construction programs.  The Governor said the budget includes almost $500 million in spending cuts through efficiency initiatives and other cost-cutting measures. The proposed budget will likely face considerable challenges in the General Assembly, which in January will have a Senate controlled by Democrats and a House controlled by Republicans.  Republican leaders have already voiced their concerns that the state cannot afford some of the new initiatives.

For nursing facilities that are dependent upon the state-funded Medicaid program, the Governor’s introduced budget does not contain any language that specifically alters Medicaid payments.  Therefore, the administration intends to fully fund both the annual cost rate adjustment (inflation) and ceiling rebasing components.  This is only the first step in the budget process but it is an important one.  For state fiscal year 2009, the estimated funding impact for these two items is a little over $36 million or about $5.60 PPD on average.  The breakdown of the two components is as follows:

Inflation (3.3%) impact  State fiscal year 2009 - $25.4 million  State fiscal year 2010 - $25.7 million

Rebasing impact   State fiscal year 2009 - $10.7 million   State fiscal year 2010 - $10.7 million

Our key challenge during the 2008 General Assembly will be to keep legislators focused on the critical need to fully fund both inflation and rebasing adjustments as they work to address their concerns with the introduced budget and craft their own version of the spending plan.

Beyond core Medicaid payment issues, the introduced budget contains language that directs the Department of Medical Assistance Services (DMAS) to continue its efforts towards the development and implementation of a plan integrating acute and long term care.  The initial rollout of the plan has been delayed until early in calendar year 2009. 

The introduced budget makes no mention of funding required to develop and implement a Medicaid pay-for-performance program for nursing facilities.  Senior DMAS staff have indicated to VHCA that at this time they do not know if the lack of new funding means that all development efforts contemplated over the next fiscal year will be put on hold or if the Department can continue to move forward with the development (but not implementation) of the program. 

Additionally, VHCA is seeking clarification on proposed budget language that modifies the treatment of life estates for purposes of determining Medicaid eligibility.  VHCA will be monitoring and reporting the progression of the budget through the 2008 General Assembly which convenes January 9th.