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Virginia Medicaid Costs Nearly $500 Million More Than Expected

December 7, 2018

As several states consider expanding Medicaid eligibility to able-bodied individuals above the poverty level, Virginia state officials have announced huge, unexpected Medicaid costs are threatening to siphon funding from programs such as education.

Although Virginia lawmakers insist the new cost burden is not related to Medicaid expansion, they acknowledge the program’s share of the budget has been growing for years and has led to $460 million in unforeseen Medicaid costs.

Plans Going Awry

The federal Tax Cuts and Jobs Act, which cut taxes and has spurred economic growth nationwide, and a court ruling broadening Virginia’s ability to tax online commerce have led many analysts to project tax revenue increases in Virginia, but the state’s high Medicaid costs will likely consume that additional revenue.

Gov. Ralph Northam has indicated a desire to spend the state’s tax windfall on a tax break for low- and moderate-income families and make the state’s earned- income tax credit fully refundable.

Republican state Sen. Bill Stanley has been promoting a plan to use the extra revenue to repair and replace the state’s aging public school infrastructure, and he says he’s disappointed by the possibility Medicaid costs will consume the likely upcoming revenue increase created by the federal tax cuts.

“I was kind of heartbroken on what effect that will have” on school spending, Stanley told the Associated Press on November 2.

Expanding the Problem

Arianna Wilkerson, a government relations coordinator with The Heartland Institute, which publishes Health Care News, says with traditional Medicaid already placing a huge burden on state budgets, Medicaid expansion will create even worse problems.

“Medicaid was originally intended to only cover those people in the most difficult of situations, like those who are disabled or have dependents, and could not afford to buy private health insurance,” Wilkerson said. “It has been steadily expanding its coverage rate and increasing its hold on state budgets for years. There’s no reason to think that expansion, which would cover people who are young and healthy and not simply the indigent or elderly, will be any cheaper to implement and manage.

“A better idea, if states want to avoid what’s happening in Virginia, would be to embrace some of the options the Trump administration has made available, such as short-term health insurance plans and allowing groups to band together to sell association health insurance plans. Both policies would allow more choice and competition in the health care market.”

INTERNET INFO:

Alan Suderman, “Virginia Facing High Unexpected Medicaid Costs,” Associated Press, November 2, 2018: https://apnews.com/6e731783cd4b43 76846b99d2e70a85f2

Article Tags
Health Care
Author
Sarah Lee is the managing editor of Health Care News and a research fellow at The Heartland Institute.
slee@heartland.org @HCPolicy