Medicaid is an incredibly important program in West Virginia, providing health coverage to nearly 500,000 residents, supporting tens of thousands of health care jobs, and keeping the doors of hospitals and health care providers open all over the state. Major changes are coming to the program as a result of Congress’ passage of HR 1 (the One Big Beautiful Bill Act), which, in addition to resulting in tens of thousands of West Virginians losing their health care coverage, will have major impacts on the state’s budget for years to come. As lawmakers consider the FY 27 budget, they are just beginning to unpack the coming consequences, though Morrisey Administration officials have so far refused to share their internal analysis of some potential costs, even as they request lawmakers push through an additional round of tax cuts the state cannot afford.
The federal Medicaid changes that will impact West Virginia’s state budget can be put into two buckets: the phasedown and loss of key state Medicaid funding sources and increased administrative burden. A forthcoming piece will highlight the SNAP costs being shifted onto the state budget.
Medicaid is a program jointly funded by the state and federal government, with the feds providing a matching rate to West Virginia of about 3:1 for every dollar the state puts in. West Virginia raises its state share of Medicaid funding via a combination of sources: the general revenue fund, lottery funding, a medical services trust fund, and various provider taxes. The largest state budget burden from HR 1 will hit as a result of its required phasedown of provider tax rates.
In recent years, West Virginia policymakers have increased the state share of Medicaid funded via the provider tax and reduced reliance on the general revenue fund, so much so that the state is spending less in the base budget for Medicaid than it did prior to the pandemic, even before adjusting for inflation.
In 2019, West Virginia spent $730 million in the base budget (general revenue plus lottery) on its share of Medicaid, compared with $686 million in FY 2025. Adjusted for inflation, state base budget spending on Medicaid shrunk by 24 percent over the period.
In FY 2019, provider tax revenues made up 24 percent of West Virginia’s total state share of Medicaid. By 2024 it had risen to 34 percent. This increased reliance on the provider tax helped state lawmakers keep the base budget ‘flat’ in recent years as a way of stemming deep revenue losses from their income tax cuts. As a result of those permanent tax cuts, upcoming losses in the provider tax will be even more challenging to offset via the state budget.
The Morrisey Administration provided some information on the budget impacts of these specific changes in its Executive Budget Report for FY 2027. In it they say, “The effect of this [provider tax] change will be a decrease in State Medicaid funds from this source, as well as a decrease in the corresponding matching federal funds,” followed by a table citing the specific provider tax reduction impact on the Medicaid program.
Source: FY 2027 Executive Budget Volume I
They go on to say, “In order to account for this decrease or to maintain the same level of federal funding, the General Revenue fund will have to provide additional funds to cover future increases in cost.”
The budget office’s analysis shows that West Virginia will see a steadily growing loss in provider tax collections in upcoming years beginning at $36 million in FY 2027 and ballooning to $178 million in FY 2031. If those funds are not replaced elsewhere, such as via the general revenue budget, West Virginia will lose four times that much funding once accounting for three lost federal dollars for every dollar that will not be drawn down as a result.
Despite this, in a budget presentation to the House Finance Committee, the Department of Human Services provided a six-year budget lookahead where they projected zero general revenue budget growth in major Medicaid funding lines through FY 31. The Morrisey Administration’s six-year financial plan projects no growth in Medicaid until FY 2030, despite annual provider tax losses beginning years prior. It is unclear whether the Morrisey Administration intends to make drastic Medicaid cuts equivalent to 14 percent of the entire Medicaid program or if lawmakers will be surprised when they find themselves asked to fill in provider tax holes with state budget dollars in future years after a six-year outlook that contained no substantial anticipated funding increases.
Under HR 1, states are also required to implement so-called “work-reporting requirements” for adults eligible for Medicaid via the expansion, In West Virginia, this will impact around 170,000 residents, for whom the Medicaid agency will now have to assess whether they are meeting a minimum threshold of hours worked each month or qualification for an exemption from those requirements in order to maintain their health coverage. This is in addition to existing income verification and eligibility requirements.
While most West Virginians covered by the Medicaid expansion are working, they often work in low-wage jobs that can be inconsistent or seasonal without any control over how many hours they are given in a month. Further, a wide body of research shows that most coverage losses under this policy are among people who are working or should be exempt but have trouble successfully documenting that work with the Medicaid agency. As such, work reporting requirements been found to have no impact on increasing employment but do result in many eligible people losing their health coverage.
In addition to the significant updates required to West Virginia’s eligibility system to implement these new requirements, HR 1 also requires states to redetermine the eligibility of expansion enrollees twice as often as they currently do.
Updating state eligibility systems to track work hours will pose significant new costs to states. While West Virginia officials have thus far declined to provide an estimate of how much it might cost to update the state’s Medicaid technology to track compliance with work requirements, officials in other states are beginning to name the costs. In North Carolina, officials estimate the increased redeterminations alone will require more state staff and cost the state around $30 million annually.
Additionally, they note a significant increase in vendor costs, including for the income verification services they use via Equifax’s “the Work Number”, a database West Virginia relies on that provides instant verification of Medicaid applicants’ wages and work hours. U.S. Senators recently accused Equifax of price gouging, or dramatically increasing their prices, in advance of the new work reporting requirements. Some states pay between $7- $20 per ping, each time they check an individual’s wages. With Congress requiring states to double their redeterminations, the cost of West Virginia’s contract with Equifax will also likely double even before accounting for contract cost increases.
Other states scrambling to implement work reporting requirements into their Medicaid systems are beginning to share cost estimates. A New York official estimated a $500 million price tag to implement and administer the new requirements. A GAO analysis found state cost estimates ranging from $10 million to over $270 million to implement and administer work reporting requirements. Congress did allocate funding for implementation but it was just $200 million, surely falling far short of the cost estimates emerging across states, meaning states will be on the hook for a significant chunk of the cost.
Building complex new systems to implement work reporting requirements is highly costly for states but very lucrative for private firms that contract to provide the technology. Since Georgia implemented Medicaid work requirements in 2020, they have spent twice as much contracting with Deloitte to build and administer their eligibility system as they have on health care for Georgians.
Combined, the provisions of HR 1 will blow a hole in West Virginia’s general revenue budget to the tune of hundreds of millions of dollars annually once fully implemented. On top of this, West Virginia lawmakers have already been presented with a budget from the Morrisey Administration that proposes using dwindling one-time surplus dollars to fund ongoing Medicaid costs. If lawmakers do not prioritize filling these holes with state budget dollars, the magnitude of Medicaid cuts we will face will have huge repercussions for West Virginians and our broader economy. State lawmakers have a responsibility to begin to grapple now with upcoming budget needs, particularly as the Morrisey Administration tries to strong arm them into more tax cuts that mostly benefit the state’s wealthiest households.
