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DLS flags hundreds of millions in DDA and Medicaid cost containment
Summary
Analysts said the Developmental Disabilities Administration budget would shrink in FY26 as multiple cost‑containment actions and funding shifts take effect; Medicaid also faces higher costs and contingent savings tied to a hospital assessment.
Department of Legislative Services analysts told the Health and Government Operations Committee that cost‑containment actions proposed in the FY25–FY26 package include multiple changes to the Developmental Disabilities Administration (DDA) and Medicaid that together amount to several hundred million dollars.
Naomi Camaro, budget analyst, DLS, said the Department of Health—s FY26 allowance totals about $21.5 billion and that the majority of that funding pays provider reimbursements across Medicaid, behavioral health and DDA programs. "The total budget across the department is $21,500,000,000 and a majority of that funding is allocated to provider reimbursements in VHA, DDA, and in Medicaid," she said.
DDA: scope and cuts. DLS reported the DDA overall budget decreases by about $190 million in FY26. Anne Braun, the DLS Medicaid analyst, detailed that multiple cost‑containment measures introduced in FY25 would be annualized in FY26. Those measures include aligning reasonable and customary wages to Bureau of Labor Statistics rates, eliminating a geographic differential, capping individual and family‑directed goods and services, eliminating the low intensity supports program, removing some wage exceptions, and other policy changes. Anne told members that the cost containment items totaled about $160 million in reductions in FY25 and about $457 million in FY26 when annualized and including federal match.
Medicaid and hospital assessment. DLS also described a BRFA proposal that would increase the hospital deficit assessment by $50 million in FY25 and $100 million in FY26, producing general fund savings in Medicaid. Braun said the BRFA assessment increases special‑fund receipts from hospitals and reduces general‑fund Medicaid need; the net general‑fund savings were shown as approximately $92.5 million in DLS—s contingent reductions table.
Questions and concern. Multiple delegates pressed DLS analysts on how the DDA reductions would affect services and workforce retention. Committee members and advocates reported heavy constituent concern about service loss and the risk that reductions will worsen staffing shortages for direct support professionals. DLS staff said the department will continue to provide detailed lists of the individual cost‑containment provisions to committees and to work with Appropriations on possible restorations.
Context and next steps. DLS emphasized that some savings are contingent on BRFA enactment and that additional information will be available in fiscal notes and later departmental budget hearings. Members asked DLS and the Department of Health for more specific impact estimates and for the DDA cost‑containment itemization to be circulated to the committee.
