Governor Announces Budget Cuts

VHCA (12/19/2008)

Virginia nursing facilities will not receive inflation increases for state fiscal year (SFY) 2010 according to provisions in Governor Kaine's Introduced Budget Amendments that will go to the General Assembly in January. Governor Kaine told General Assembly members of the money committees that he tried, to the extent that he could with the steadily decreasing state revenue picture, to protect direct services to the poor. Total Medicaid cuts recommended by the Governor are approximately $400 million.

The elimination of the Medicaid inflator for nursing facilities has an estimated budget impact of $28.4 million or approximately $4.40 per patient day. This payment adjustment will apply to Medicaid days of service provided between July 1, 2009 and June 30, 2010. On Wednesday, we reported that this amendment essentially replaced the existing payment cut already in effect for SFY 2010 which totaled $11.7 million.  Based on discussions yesterday with senior staff from the Department of Medical Assistance Services (DMAS), the removal of inflation for SFY 2010 is in addition to the existing budget cut.

In addition, all Medicaid providers will have payments delayed as another attempt to push state expenditures into future fiscal years. Currently, all Medicaid claims submitted in a weekly period are paid one week later. This budget amendment changes the cycle such that payments will be made two weeks after the week they were submitted. This action creates one-time savings to the Commonwealth of an estimated $50 million.

The Governor warned legislators that he may have to recommend further cuts in February 2009 after the state receives sales tax information from the holiday season spending along with estimated and actual income tax withholding updates. Governor Kaine said he didn't want to propose additional difficult cuts and state employee layoffs prematurely and wishes to wait to see if more cuts will be needed once the January data is available.

A key provision in the Governor's proposed amendments is the inclusion of a $0.30 per pack cigarette tax increase. The Governor outlined his desire to use the tax increase to generate $148 million in revenues to minimize Medicaid expenditure cuts. Should the tax hike proposal fail, all Medicaid providers would be at risk for greater budget cuts. One strategy that the administration may be using is to keep the tax hike in play while the incoming Obama administration works to finalize its plans for fiscal relief to the states in the possible form of enhanced federal Medicaid matching funds.

All nursing facility members are encouraged to contact their state senators and delegates in the next month and stress the critical need for adequate funding of Medicaid payment rates. Please refer to the budget talking points previously shared with members. If you need assistance, please contact VHCA at 804.353.9101. VHCA staff are continuing to review the Governor's budget amendments and will keep members informed as any new information becomes available.