Inside Olympia – Governor Inslee’s budget: Big challenges, big opportunities, big decisions

December 14, 2016

The big budget picture

Today, Governor Jay Inslee released his proposed budget for the 2017-2019 biennium. As has generally been the case in recent years, increased revenues from improving economic conditions are being subsumed by multi-billion dollar, court-ordered funding requirements for basic education. Expansion and reform of the state behavioral health system is a high funding priority, one which WSHA strongly supports.

In response to these funding needs, the governor’s budget includes $4.4 billion in new revenue dedicated overwhelmingly to education. Most revenue comes from new taxes and some from closing budget loopholes. In particular, it includes a tax on capital gains and carbon emissions, and an increase in the business and occupation tax.  We do not believe this applies to non-profit hospitals nor public hospital districts.

Impacts on health care and hospitals

The governor’s budget is a mixed bag for hospitals/health systems and the patients they serve, with some steps forward and some backward. The budget proposes to cut payments to hospital based-clinics, while making significant investments in behavioral health funding, mostly to fix issues at Western and Eastern State Hospital.

Hospital-based clinic cuts

The governor’s budget proposal includes a cut of at least $42 million over the two-year period for services to Medicaid enrollees at hospital-based clinics. It is unclear what assumptions were used in determining this cut. Many of these clinics are the main or only source of specialty services for Medicaid and Medicare enrollees. In some communities, they are also a main source of primary care, as many private practices limit the number of Medicaid patients they see. Since Medicaid payment is already significantly less than the actual cost of providing care, the proposed cuts threaten access to these services. If access is compromised, patients may turn to emergency departments or delay treatment, which drives up the cost of care. We are concerned that the $42 million estimate appears to be from an older study, and it may significantly underestimate the amount of the cut.

Major reforms for long term mental health treatment

WSHA applauds Governor Inslee for his leadership in behavioral health, in particular in the area of the state hospitals and patients needing long-term mental health treatment. This budget envisions a significant shift in the delivery of treatment by moving patients out of the state hospitals and into smaller facilities across the state. We expect the legislature to spend a significant amount of time debating changes to long-term treatment in the community. The behavioral health packages invests about $139 million state ($200 million) total funds, though much of that is targeted at the state hospitals.

The governor’s budget proposes the following significant reforms:

  • $2.6 million in state funds ($3.7 million total) to create nine 16-bed state-operated treatment facilities serving patients on involuntary 90- and 180-day court treatment orders. The governor proposes $31 million in new capital funds for three facilities, recognizing that not all will be built and open at the same time. These facilities are meant to take the place of the state hospital beds.
  • $53 million state in funds for improvements to Western and Eastern State Hospital, including 137 new staff members.
  • $72 million in state funds ($111 million total) to assist in discharging patients from Western and Eastern State Hospital. The governor’s budget includes significant investments in providing safe, timely discharge from the state hospitals, including increasing housing and peer placement teams; adding 60 new supportive living beds; and adding more than 300 new long-term beds, such as in adult family homes, assisted living facilities, skilled nursing facilities, enhanced service facilities and supportive housing. WSHA will advocate for similar support for acute-care hospitals needing to discharge complex patients.

Additionally, the budget proposes the following for community behavioral health:

  • $10 million in state funds ($28 million total) for hospitals opening new psychiatric service, and updates to payment rates for existing hospitals that provide inpatient psychiatric care. WSHA is pleased to see this investment but is interested in learning more details.
  • $2.3 million in state funds ($5 million total) to create two crisis walk-in centers.
  • About $1 million in state funds ($1.9 million total) to combat the opioid epidemic using nurse case managers to coordinate medically assisted treatment for patients with opioid addiction, and transition to health homes. The governor also proposed about $700,000 in state funds ($1.3 million total) for a pain management call center to support primary care providers in treating patients experiencing pain, and support medication assisted treatment. WSHA is disappointed the budget for the Department of Health did not include funds for improvements to the state drug prescription monitoring program.
  • A cut of $8 million in non-Medicaid reserves for behavioral health organizations.

During the legislative session, WSHA is asking for increased Medicaid payment for the collaborative care model in primary care and depression screening for adolescents. WSHA is also asking for funding for additional mental health work force and efforts to combat the opioid crisis.

Other Important Areas

  • Hospital Safety Net Assessment continuation: We are pleased the budget continues the safety net assessment as it is currently operating.
  • 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.
  • Rural Nursing Homes: We are disappointed the governor did not propose to add any additional funds to mitigate the impact of rate reductions in rural communities.
  • Pharmacy Commission: The governor includes about $1 million in state funds to help address the State Pharmacy Commission’s backlog of rule changes and improve communication with individual pharmacies and pharmacists. This funding increase should help modernize many of the state’s pharmacy rules that are decades old and no longer reflect current practices.
  • Foundational Public Health Services: The governor proposed $20 million in state funds for local public health departments to improve their ability to respond to the threat of communicable diseases, respond to emergencies and conduct disease surveillance. It also includes about $4 million in state funds to modernize the Department of Health’s laboratory and data collection and analysis capability. These funds will help support ongoing efforts between hospitals and public health to ensure that communities across the state remain healthy and can respond to emerging threats.

Health Benefit Exchange: The budget includes about $13 million in new appropriation authority of non-state revenue for infrastructure replacement, operational improvements and outreach for the Washington Health Benefit Exchange.

Next steps and action needed

The legislature will convene on January 9. Both the House and Senate will propose their own versions of the budget, and then all sides will negotiate to reach a budget agreement. Revenue forecasts released along the way will inform the process.

We urge you to 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. 

Legislative session kickoff webcast January 10 at noon

We are ready for the 2017 legislative session and are excited to invite you to our legislative session kickoff webcast from 12-1 p.m.January 10. WSHA will outline our top priorities for the session and discuss how recent leadership changes might affect health care legislation this year. More information will be available soon!


Governor’s budget
Find more policy and advocacy news and resources on our website


Contact Us

Washington State Hospital Association
999 Third Avenue
Suite 1400
Seattle, WA 98104

Map / Directions

206.281.7211 phone
206.283.6122 fax

Staff List