Virginia Budget Targets Medicaid Spending

December 21, 2012

Citing a difficult economy, Virginia Governor Bob McDonnell this week proposed a budget that would cut $900 million from state services, primarily Medicaid and public education.

The draft two-year budget contains $85 billion in spending, a $5 billion increase over the previous budget. Without a tax increase, however, analysts caution that revenues are not likely to keep pace with spending.

Currently, spending on Medicaid accounts for roughly 20% of the Virginia's general fund budget.

Overall spending for Medicaid would be increased by $600 million to cover enrollment growth in the state's program.

Following the example of some other states, the budget fails to account for increases in the costs of Medicaid payments to hospitals and nursing homes, resulting in an estimated $324 million shortfall.

Funding for community health centers and free clinics would be cut in half, while prescription drug assistance for underinsured Virginians would be reduced as well.

Physician reimbursements under Medicaid were not specifically cut.

While reducing spending for Medicaid and education, the budget increases funding for transportation, prisons and economic development.