Subcommittee hears DMAS plan to implement Medicaid changes and warns of large hospital payment cuts

Cheryl Roberts, director of the Department of Medical Assistance Services, told the Joint Subcommittee for Health and Human Resources Oversight on Tuesday that the agency is preparing to implement a package of changes to Medicaid eligibility, enrollment and benefits in the new federal/state law but is still awaiting key CMS guidance.

Roberts said the changes affect the expansion population (about 600,000 people), foster care and other subprograms and will require systems work, new reporting and outreach. "This is going to be a collaboration," she said, noting the Governor's office and CMS will be involved in implementation. Roberts told the committee that expansion eligibility will move to six-month redeterminations, that states must use additional data sources to detect duplicate enrollment, and that the federal death master file must be checked quarterly to remove deceased individuals from rolls.

The subcommittee heard several specific implementation details that will affect members, providers and vendors. Members may change managed-care plans through Sept. 25, Roberts said. Retroactive coverage will be shortened: expansion members would receive one month of retroactive coverage and other Medicaid populations two months, down from three months currently. The new law also reinstates cost-sharing for expansion members with a possible maximum of $35 per month.

One of the most consequential provisions discussed was a community-engagement (work) requirement that would begin Dec. 31, 2026. Roberts said expansion enrollees would need to participate in one or a combination of work, education or community service for 80 hours a month, but CMS must provide definitions and operational guidance before Virginia can implement the requirement. "We do not have the definitions yet," Roberts warned, and she said MCOs may not perform the calculations because CMS views that as a conflict of interest.

Roberts described other changes: a new option to allow some people to receive home- and community-based services without meeting nursing-home eligibility via a waiver; a federal "maternal health transformation" program that would provide $100 million annually to Virginia for five years with additional competitive funds; and increased state monitoring and contract addenda to hold MCOs to promised services.

Chris Gordon, introduced as a DMAS CEO-level official, briefed members on the fiscal side of the federal legislation that limits provider taxes and caps state-directed supplemental payments. Gordon said Virginia currently taxes hospitals at 6% of net patient revenue, which he said yields about $1.6 billion; roughly $650 million of that is used to fund the state share for expansion while the remainder supports supplemental payments to hospitals. Under the new federal rules, states will be restricted to directed payments at no more than 100% of Medicare and certain rate assessments must be reduced; Gordon testified that shifting down to Medicare-based caps and an annual 10% reduction in supplemental payments will reduce hospital-directed payments substantially and, over 14 years, could total about $26 billion in reduced payments to hospitals and related providers.

Gordon said the impact would be felt across private and public hospitals, naming the large academic public hospitals paid at higher multiples of Medicare (UVA and VCU) and other systems that receive supplemental payments. "That is the biggest impact," he said, describing cuts to payments now made above Medicare rates. He warned the reductions would have macroeconomic effects — lower employment in health care, fewer services and potential strain on safety-net providers.

Committee members pressed DMAS on cost estimates. Roberts and Gordon said DMAS is preparing cost models but must wait for CMS guidance to finalize many figures. Roberts also said DMAS had taken steps in procurement and contract monitoring for Cardinal Care managed care earlier this year, combining long-term and acute care functions and consolidating foster-care enrollment into a single plan to improve continuity of care.

The subcommittee adopted an electronic meeting policy and conducted organizational votes at the start of the session (nominations for chair and vice chair) by voice vote.

The agency committed to returning with more detailed estimates on administrative costs, the potential budget impact of work requirements, and numbers on changes to the emergency/undocumented match rate and other fiscal items once CMS supplies federal guidance.

Members signaled concern about rural hospitals and public academic hospitals that receive large supplemental payments, and repeatedly asked DMAS to provide quantification of expected budgetary impacts and to show which costs would fall to state general funds versus hospitals.

The committee will consider follow-ups from DMAS as guidance and additional fiscal analyses become available.