Three legislative bodies – the Joint Subcommittee on Health and Human Resources Oversight, the House Health and Human Services Committee, and the Joint Commission on Health Care — recently received updates from the Department of Medical Assistance Services (DMAS) on the Medicaid provisions in the recently-enacted federal reconciliation bill and their implications for Virginia. The changes are substantial in scope, requiring IT systems changes and staff training, and will affect how Virginia supports hospitals through the Medicaid program. State and local collaboration will be critical in the implementation process, as eligibility determination for many Medicaid members is conducted at local departments of social services. Legislators expressed strong interest in understanding the potential impacts to the state budget; however, DMAS Director Cheryl Roberts stressed that the agency is awaiting additional guidance from the federal Centers for Medicare and Medicaid Services for many provisions of the bill in order to develop cost estimates and prepare for implementation.
Key provisions of the reconciliation bill that Director Roberts highlighted include the following:
- A requirement to redetermine eligibility for individuals in the Medicaid expansion population (individuals who earn up to 138 percent of the federal poverty level who are covered through the expansion of Medicaid under the Patient Protection and Affordable Care Act) twice a year, rather than annually, as is currently required. The state’s outdated IT system for benefits programs has made completing timely annual redeterminations a challenge for local departments, and VACo has worked with the Virginia League of Social Services Executives and other advocacy partners in support of securing funding for a system replacement. The 2024 Appropriation Act included funding to begin the project, but additional funding is needed. This requirement takes effect in January 2027.
- A requirement for individuals applying for coverage or currently enrolled as part of the expansion population to meet community engagement requirements (by working, volunteering, or engaging in certain other qualifying activities), effective December 31, 2026, with certain exemptions. The bill provides for $200 million in implementation grants to states.
- A new waiver opportunity that would provide additional flexibility to allow for home- and community-based services to be provided to individuals without a requirement that those individuals would otherwise need nursing facility or other institutional care; the bill includes $50 million in FY 2026 and $100 million in FY 2027 for implementation.
- Limitations on states’ ability to impose taxes on providers as a mechanism to fund states’ Medicaid contributions. In Virginia, a tax on the net patient revenue of private acute care hospitals funds the state’s share of Medicaid expansion; although the reconciliation legislation would gradually reduce the maximum rate allowed, beginning in 2027, DMAS does not anticipate impacts to the state’s ability to fund its share of Medicaid expansion. However, Virginia also imposes an assessment on most hospitals in the state that funds the state share of additional payments to hospitals beyond standard Medicaid reimbursements, and these payments would be affected by the rate caps in the reconciliation bill. Other provisions in the bill reduce amounts that may be paid to providers through managed care organizations.
- A new Rural Health Transformation Program that would provide $10 billion per year to states for FYs 2026-2030. Virginia would receive $100 million annually through the portion of the funding that is distributed equally among all states; the remainder of the funding would be allotted based on certain factors to be considered by the Secretary of Health and Human Services, such as the proportion of rural health facilities in the state relative to the number of rural health facilities nationwide. The state must submit a plan for use of the funds, to include certain allowable purposes spelled out in the bill, such as payments to health care providers or workforce recruitment and retention efforts. The timeline for securing funding is short; a plan must be approved or denied by CMS by the end of 2025.
Extensive discussion with state policymakers is expected in the months ahead as CMS provides additional guidance and DMAS determines what state resources may be necessary to implement the
changes.
VACo Contact: Katie Boyle