WSHA disappointed with major cuts to hospital Safety Net Assessment Program and hospital payment caps for PEBB/SEBB enrollees
Gov. Inslee released his proposed $79 billion 2025-2027 state budget on Dec. 17. This includes both new taxes and some budget cuts. The governor’s Proposed 2025-2027 Budget and Policy Highlights outlines his priorities for this budget and provides an overview of the state’s financial position. This is one of the final acts of Gov. Inslee’s three terms of service. Governor-elect Bob Ferguson is expected to make changes or respond to this budget early in his term.
Release of the governor’s proposed budget is just the beginning of the state’s budget development process. The Legislature will convene on Jan. 13, 2025. The House and Senate will each release a proposed budget during the legislative session and work together to craft a final budget by the last day of session, April 27.
The state is projecting a deficit of between $10 billion and $12 billion over the next four years. This budget includes a combination of revenue increases and budget cuts to achieve the constitutionally required balanced budget over this period.
Tax increases. Inslee’s budget proposed a large increase to the Business and Occupation (B&O) tax rate. It is unclear to what degree hospitals could be impacted by this proposal. A proposed wealth tax is assumed to raise $3.4 billion annually by 2027-2029. The new tax would apply to intangible wealth of more than $100 million at 1% per year.
Cuts targeting hospitals. Most impactful to hospitals are proposals to: 1) raid $75 million state/$370 million total from the hospital Safety Net Assessment Program (SNAP) and move it to the state general fund; 2) cap PEBB/SEBB hospital payments at the lesser of the contracted rate or 200% of Medicare (decreasing to 190% of Medicare in 2029). PEBB/SEBB caps would shift costs onto the commercial market or have a negative impact on access to care.
WSHA position on Inslee’s budget. WSHA strongly opposes the SNAP raid and PEBB/SEBB caps. SNAP was the result of significant negotiations with the Legislature in 2023. Hospitals currently contribute $452 million a biennium to the state’s general fund. WSHA and our members will advocate against both proposals.
WSHA has outlined highlights related to WSHA’s budget priorities and other notable proposed investments below.
Hospital-Specific Proposals
- -$75 million GFS/-$379.9 million total raid of funds from the Safety Net Assessment Program (SNAP) to the state general fund. Reduction in payment to hospitals is magnified due to loss of federal match. WSHA strongly opposes this cut after significant negotiation with the Legislature in 2023.
- -$44.2 million total/2025-2027 biennial, increased to -$255.5 million total/2027-2029 biennial to reflect reductions due to mandated caps (initially 200% of Medicare for most hospitals) on hospital inpatient and outpatient reimbursement coupled with mandatory participation in PEBB/SEBB. Additional payment reductions and increased savings will be phased in over time.
Complex Discharge
- $24.6 million GFS/$49.2 million total to maintain bed capacity at the Transitional Care Center of Seattle: a state-owned skilled nursing facility.
- $12.9 million GFS/$20.2 million total for rental subsidies to expand in-home options to transition individuals with lower acuity currently residing in nursing facilities out of these acute care settings. This is offset by nursing home caseload reduction.
- $746,000 GFS/total for a multi-sector plan on aging to address infrastructure and services for a rapidly aging population.
Behavioral Health
- $18.5 million total for 90/180-day civil commitment beds at the University of Washington.
- $40 million GFS/total for the UW Behavioral Health Teaching Facility, which will operate 75 long-term beds.
- $54.3 million GFS/$106.4 million total for increased costs related to the Community Behavioral Health Supports program.
Other Health Care
- $30 million total for continuation of the Cascade Care premium payment subsidy program through calendar year 2026 for individuals enrolled in the Health Benefits Exchange.
- $20.2 million/28.9 million total to reflect the transition of the Apple Health Expansion program from managed care to fee for service.
