Non-partisan legislative staff in the Washington state Senate estimate an accounting error at the Washington Health Care Authority could cost the state hundreds of millions of dollars.
The concerns stem from the Children’s Health Insurance Program, which pays for comprehensive medical, dental and vision care for eligible children and, in some states, including Washington, pregnant women.
In January 2024, the Health Care Authority was alerted by federal Centers for Medicare and Medicaid Services that it had been drawing down too much in federal funds, based on reported expenditures, according to an email from legislative staff to the legislature obtained by The Center Square.
CMS told HCA yearly federal funding for the program would be reduced by roughly $100 million ongoing.
The federal government said, “Ok, all these years we’ve been awarding you $250 million a year for this program and you haven’t been spending up to that level, we’re going to reduce your grant,” according to the staff email.
The tragic irony is that Washington state spending on the CHIP program has not been reduced at all with taxpayers still footing about $250 million every year, according to the email. But HCA failed to properly account for what was being spent, so the federal government cut the grant.
HCA did not forward the alert
The HCA failed to alert budget writers or the Legislature of the finding, and the Legislature, and Governor’s Budget Office, continued to assume federal funding for the CHIP program at roughly $250 million per year, according to the staff email.
“This was in 2024 and budget writers didn't know anything about this at the time. We still didn't know anything about it up until just like a month ago, when non-partisan staff brought it to our attention,” said Sen. Chris Gildon, R-Puyallup, in a Nov. 6 interview with The Center Square.
Gildon is the ranking leader on the Senate Ways & Means Committee, which oversees the state budget.
“When you compound that out, and go out into the outlook cycle, you're looking at about a $650 million dollar blunder by the Healthcare Authority,” he said.
The estimate from non-partisan legislative budget staff calculates the financial hit to be $654 million through the four-year outlook, based on the email provided to The Center Square.
That estimate includes past overpayments, as well as losses of future federal funding, which amounts to $100 million in funds that must be reimbursed to the feds for prior years, plus a little over $100 million a year ongoing through fiscal year 2031.
“Because of the way these funds are distributed amongst the states, there's no money there to go and get the back pay and say, “we reported an error, would you please pay us back?” No. That money is all apportioned to the 50 states. And so, all of that money's been spent,” said Gildon.
It is unclear why HCA was dramatically underreporting how much the state was spending on CHIP, or why once the feds notified HCA of the error, it was not reported to lawmakers or the governor.
HCA responded via email to a request for comment about the accounting error and cost to the state.
“The assertion that this issue will cost Washington taxpayers hundreds of millions of dollars is inaccurate. Right now, if the CMS allocation is not corrected, HCA and OFM estimate a potential $54M shortfall in federal CHIP funding for state fiscal year 2027," wrote Katie Pope from HCA communications.
"However, we are in the process of working with CMS to correct our allotment. There may be little or no impact in future years once that process is complete,” she said.
The Center Square sent a couple follow up questions to Pope.
Those questions included whether the staff estimated budget impact of $654 million was incorrect and if HCA believes the number is a mistake.
"The assertion that this is a $654 million impact to the state budget through 2031 is incorrect," Pope responded.
"The memo from legislative staff that you reference has a number of errors. First, it assumes that the funding allocation will remain at this level going forward. That's not accurate to how the calculations are done — CMS re-evaluates annually based on either the prior year’s reporting or allotments."
"Second, the legislative staff member reached their number by taking an average of previous allotments and subtracting the current allotment. Instead, the impact to the budget should be based upon a comparison between what is included in the state budget versus future projections. The staff member’s incorrect calculation dramatically overstates the budgetary impact because they used inappropriate points of comparison," Pope said.
Gildon said even if lawmakers only have to come up with about $100 million in the coming legislative session to reimburse the federal government, that's going to be a huge problem when the state is already facing a projected multibillion-dollar deficit going into 2027.
“This is one more compounding factor that's leading to so many of our budget woes. And I would like to know the inside story of what happened,” Gildon said.
