Governor Inslee’s Budget: Steps Forward, Steps Backward, New Taxes

December 18, 2014

The Big Budget Picture

Today, Governor Jay Inslee released his proposed budget for the 2015-2017 biennium. Despite increasing stability in the overall economy and modestly increased state revenues, the state’s budget is facing a multi-billion dollar gap because of the pressures of the McCleary education decision, the class size initiative, the mental health court decisions, and salary increases for state employees and teachers.

The Governor’s budget includes $1.4 billion of new revenue in order to avoid deep cuts. Some revenue comes from new taxes and some from closed budget loopholes. In particular, it includes a tax on capital gains, carbon emissions, and tobacco/e-cigarettes. It funds only about 25% of Initiative 1351, which was passed by a small majority of voters in November to mandate smaller class sizes.

Because of the demands of the McCleary decision, it has been widely understood that the budget gap could not be filled by cuts alone, and that new revenue would have to be found. The Washington State Hospital Association supports an approach that includes both sustainable revenues and reasonable cuts.

Impacts on Health Care and Hospitals

  • The Governor’s budget is a mixed bag for health care and hospitals and the patients they serve, with some steps forward and some backward:
  • Hospital-based clinic cuts: We are very disappointed the Governor proposes to cut Medicaid payment rates for hospital-based clinics by $42 million over the two year period. These cuts to the clinics will hurt the ability of Medicaid patients to get both primary and specialized care, as the current payment rates help close the gap between what Medicaid pays and the actual cost of the care provided during the visit. This is a shortsighted cut that will hurt access to the hundreds of thousands of new Medicaid enrollees.
  • Hospital Safety Net Assessment continuation:  We are pleased the budget reflects the proposal supported by the WSHA Board to maximize the benefits of the safety net assessment program. It assumes the program will continue and not phase down in the biennium. It also assumes the state will take advantage of the increased match being provided to the Medicaid expansion population.
  • Mental health funding:  We are pleased the Department of Social and Health Services’ budget includes a total of $60 million in important new investments in mental health. These include paying for inpatient mental health services for involuntary patients to reduce boarding; a new 30-bed civil ward at Western State Hospital; 35 new forensic beds at Western and Eastern State Hospitals; a pay increase for psychiatrists to help recruitment and retention; and new psychiatric intensive care units at Eastern and Western State Hospitals.
  • Loan repayment funding:  We are pleased that the Governor included some money for student loan repayment for health care professionals to increase the number of professionals serving in rural and underserved areas, including mental health providers. We are disappointed he only included $3 million as opposed to the $8 million needed to fully restore the program.
  • Primary care physician increase:  The Governor included $236 million ($79 million state funds) to increase the payment rate to physicians providing primary care services to Medicaid enrollees.
  • Critical Access Hospitals:  We are pleased the Governor does not propose cuts to critical access hospitals, which provide essential services to rural communities across the state.
  • Certificate of Need fee increase:  The Governor proposes $457,000 in new fees for the Certificate of Need program to update the methodology and review standards.
  • Infectious disease response:  The Governor gives the Department of Health $14 million to improve its capacity to identify and effectively combat communicable disease outbreaks.
  • Medicaid outreach:  The Governor includes $200,000 to reach potential Medicaid enrollees, particularly those with language or cultural barriers.

Next Steps and Action Needed

The Legislature will convene on January 12, 2015. Both the House and Senate will propose their own versions of the budget, and then all sides must negotiate a budget all can agree to.

In the meantime, please contact your state legislators and discuss the impact of the clinic fee cut to patients and communities. In particular, please tell your legislators that hospital-based clinics are critical to ensuring access to high-quality health care in this state. These clinics provide primary and specialty care services that may not continue in many communities without sustainable funding.

Hospital leaders are also encouraged to voice their support for a budget approach that includes both revenues and cuts. Without revenues, the cuts will be far too deep, not just in health care but in other areas of vital infrastructure. Please let us know the results of your discussions.

Call to Action

Contact your legislators about proposed clinic fee cuts for Medicaid

WSHA Policy and Budget Priorities for 2015

Governor’s Budget

Hospital-Based Clinic Cuts and Hospital-Specific Projections

WSHA Priorities and Issue Briefs


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