Good news: No direct cuts to hospitals. The House and Senate released their final supplemental budget on March 11. We are pleased to report the budget does not include any direct cuts to hospital reimbursement.  

This session, WSHA strongly opposed the Governor’s proposals to reduce Medicaid reimbursement for hospital-based outpatient clinics ($39 million/year cut to hospitals) and eliminate the managed care fee-for-service for the pharmacy benefit ($20 million/year cut to hospitals). Neither cut was included in the final budget.  

We are also pleased to report the final budget retains coverage for adult physical therapy, occupational therapy and speech therapy ($41 million/year statewide for all services). In its initial budget, the House proposed eliminating Medicaid therapy coverage for adults.  

Your advocacy made a difference! Our combined advocacy efforts and many hospital leader conversations with legislators made a difference. The final budget reflects an understanding that hospitals cannot bear the burden of additional taxes or funding cuts. We also achieved some tax relief. 

Sales tax and B&O surcharge relief for hospitals and physician/provider groups. One of the major priorities for WSHA was to repeal the additional B&O surcharge for hospital revenue. We are pleased to report that ESSB 6346, also known as the millionaires’ tax, included two provisions containing one year of relief in 2029 from the 0.5% B&O tax surcharge on revenue over $250 million per year for: 1) hospitals; and 2) health care service providers in Title 18. WSHA’s dogged advocacy for hospital-specific tax relief will save hospitals $60 million in 2029. Large health systems will save additional dollars from B&O relief related to physician groups and other health care provider services.  

ESSB 6346 also included repeal of the new sales taxes on services enacted last year beginning Jan. 1, 2029. WSHA estimates at least $17 million in savings for hospitals from this provision. 

Increased caseloads lead to increased state spending. The state is facing a projected $2.3 billion budget deficit for the remainder of the biennium (until July 2027) and is required to have a balanced budget. For the 2025-27 biennium, the final budget appropriates $80.2 billion in general funds. These amounts include a net increase of $1.7 billion state and $3.2 billion total budgeted funds at maintenance level to continue current programs and meet statutory obligations. The largest cost drivers are caseload increases in Medicaid and medical assistance, Working Connections Child Care, and long-term care services.  

How a balanced budget was achieved. The budget was balanced on several assumptions: over $1 billion in fund transfers (including an $880 million transfer from the Budget Stabilization Account), $157 million from prior period adjustments, $767 million in expenditure savings from reversions, and $395 million from a revised capital gains tax distribution. The proposal assumes $36 million in new state revenue in 2025-27 from several relatively small tax changes. It also assumes $2.2 billion in 2027-29, including revenue tied to the millionaires’ tax. 

Most significant budget impacts to health care. The most significant items included in the final budget that will impact health care and hospitals include: 

  • Funds to continue premium assistance for Washingtonians purchasing insurance through the Washington Health Benefit Exchange. ($25 million total) 
  • Caseload reduction and moving from managed care to fee-for-service in the Apple Health Expansion program for undocumented residents of Washington State. (-$30.6 million state, -$32.8 million total.) 
  • Significant funding to address impacts of federal changes to Medicaid eligibility and the eligibility verification process due to HR 1 for work requirements. ($2.5 million state, $14.6 million total) 

WSHA staff have compiled a summary table outlining the areas of the budget related to health care.  

Next Steps. We expect the House and Senate to vote to approve the final budget tomorrow morning. The legislature will adjourn sine die tomorrow, March 12. 

Legislative Session Wrap Up Webinar on 3/26. For a deeper look at the session, be sure to register to join the legislative session wrap-up webcast at noon on March 26. Attendees will have the opportunity to ask questions and learn about next steps for newly passed legislation.