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Virginia facing high unexpected Medicaid costs

November 2, 2018

RICHMOND, Va. (AP) — Virginia is facing a huge bill for unexpected Medicaid costs that hamper proposed new spending on things like school improvements or tax breaks for the poor.

State officials said Friday that Virginia has about $460 million in unforeseen Medicaid costs.

The new costs, first reported by the Richmond Times-Dispatch, are unrelated to Virginia’s recent decision to expand Medicaid eligibility to low-income adults under the Affordable Care Act.

Instead, Secretary of Finance Aubrey Layne said much of the new costs stem from faulty forecasts overestimating the benefits of having private health insurers cover a greater number of some of the state’s more costly Medicaid recipients. Another reason for the increase is a higher-than-expected enrollment of children in the state’s Medicaid program, he said.

Medicaid is a federal-state collaboration that provides publicly funded health care to poor and disabled people. Its share of the state budget has been steadily growing for several years, limiting Virginia’s ability to spend in other areas like education and transportation.

The new Medicaid costs could complicate how lawmakers deal with projected windfalls when they take up the state budget during next year’s legislative session. State revenues could grow by hundreds of millions of new dollars due to last year’s federal tax overhaul and a court ruling that broadened the state’s ability to tax online purchases.

Democratic Gov. Ralph Northam has announced he wants to use part of the extra state revenue from federal tax cuts to give a tax break to low- and moderate-income families. Northam wants to make the earned-income tax credit fully refundable.

Republican state Sen. Bill Stanley has been pushing to use new income from online sales taxes to repair and replace the state’s aging public school buildings, many of which are in poor condition.

“I was kind of heartbroken on what effect that will have” on school spending, Stanley said when the governor told about the new Medicaid costs Thursday.

Northam spokeswoman Ofirah Yheskel said the governor and his team are still developing a proposed budget to present to lawmakers in December.

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