Virginia lawmakers will face a record $3.2 billion increase in state funding for Medicaid over three years and an additional $964 million to support K-12 public education, as the state elects a new governor amid rising costs and economic uncertainty.
Va. faces $3.2 billion hit for Medicaid, $1 billion for K-12
Medicaid
04 Nov 2025
Source: Richmond Times Dispatch
The biggest challenge will be the new Medicaid forecast, released on Monday. It shows a total increase of projected costs of $410 million in this fiscal year and almost $2.8 billion in the next two-year budget that Gov. Glenn Youngkin is due to introduce next month.
Youngkin and the state’s Medicaid office warned Monday of examples of fraud, waste and abuse, without specific examples.
They also noted “poor operational performance” by one of the private managed care companies that handle most of the services for the program, which accounts for more than $27 billion in combined state and federal funding this year and serves about 1.1 million Virginians.
“Virginia will be making a greater investment in Medicaid than ever before to support those in need, while also pursuing meaningful reforms to crack down on fraud, waste and abuse to protect taxpayers and strengthen the integrity of the program,” said Rob Damschen, Youngkin’s director of communications.
“The annual Medicaid forecast is a formula-driven process, but this year’s numbers have been distorted by the poor operational performance of a single managed care organization,” Damschen said in a statement that did not name the company. “We are taking a comprehensive look at what’s driving these and other costs — and will ensure we are not using taxpayer dollars to bail out mismanagement.”
State Medicaid Director Cheryl Roberts also cited “apparent fraud, waste and abuse in several lines of service that are driving up spending.”
“In addition, one critical driver of this forecast is anomalous managed care organization performance resulting in sharp increases in rates,” Roberts said in a letter to leaders of the General Assembly budget committees and the director of the state department of planning and budget.
Mary Olivia Rentner, spokesperson for the Department of Medical Assistance Services, said the state Medicaid agency “has an aggressive plan to address fraud, waste, and abuse. Implementation details are forthcoming.”
“The ultimate goal is to preserve Medicaid services for those that most need them,” Rentner said. “We are currently working with the Governor’s office, outside actuaries, and the (managed care organizations) to address these issues.”
Del. Mark Sickles, D-Fairfax, vice chairman of the House Appropriations Committee, said he was not surprised by the big increase in Medicaid costs.
“They need to watch their program better,” suggested Sickles, who chairs the House Appropriations subcommittee on health and human services. “This is not their first year.”
The Youngkin administration issued a new contract for five managed care companies, effective July — substituting Humana Corp. for Molina Health Care. All four of the returning companies lost money in the past fiscal year, so the state has to raise the monthly rate it pays them to provide services for each participant in the plan, both for long-term and acute care.
“Everyone has been aware that for the last four quarters, rates have not been sufficient to cover costs, and all four plans have taken losses,” said Doug Gray, executive director of the Virginia Association of Health Plans.
“None of this is a surprise,” Gray said. “It’s just that the total number is eye-popping.”
He said one reason for rising costs is a Medicaid population that’s getting sicker.
“Acuity is rising rapidly in the Medicaid program,” he said. “We’re losing healthy enrollees and keeping sick enrollees. The costs are rising quickly.”
Gray said the companies are working with the state Medicaid office, Youngkin administration and General Assembly to examine services that have grown fastest in use and costs.
“There’s plenty of responsibility to go around,” he said.
K-12 costs
The update in costs for K-12 public education is far less dire than Medicaid, but the two programs represent the largest areas of spending in the state budget. Lawmakers also are bracing for increases in state funding to compensate for cuts in federal spending on food assistance and other social safety net programs under President Donald Trump.
The so-called “rebenchmarking” of K-12 costs shows an increase of more than $1.1 billion. That is partly offset by reductions in the cost of fringe benefits for employees and the state’s portion of the local composite index that determines the share that each local school division pays. The estimates do not include updated student enrollment as of Sept. 30 or the revenues from the portion of the state sales tax that is reserved for education.
The next governor — either Democrat Abigail Spanberger or Republican Lt. Gov. Winsome Earle-Sears — will face a major budget challenge when she takes office on Jan. 17.
“Whoever is elected governor tomorrow, they’re going to have three to four really bad years from a financial standpoint,” said Sen. Creigh Deeds, D-Charlottesville, a member of the Senate Finance & Appropriations Committee.
“We’ve got a tough period of time we’ve got to go through,” Deeds said. “And we’ve just got to roll up our sleeves and get it done.”