Medicaid will cost Virginia half a billion dollars more than expected over the next two years. How should the state fix its forecasting?

Virginia’s lawmakers were smacked with an unexpected $462.5 million Medicaid bill in November that they have to pay in the biennial budget, and now they’re debating how to stop it from happening again.

The nearly half-billion dollar shortfall is mostly rooted in the state’s overly optimistic estimate of how much money it would save by putting its most expensive members — those with disabilities and older adults — into a new health plan, called Commonwealth Coordinated Care Plus.

(The shortfall isn’t related to Medicaid expansion. The federal government will pick up the vast majority of that tab.)

The Department of Medical Assistance Services, which manages Virginia’s Medicaid program, has already outlined a plan to rectify the problem and prevent it from happening again.

But Sen. Ryan McDougle, R-Hanover, has a plan of his own, and it involves creating a new state agency that would do the job for DMAS.

“Missing the estimates by the magnitude of almost a half billion dollars is a significant enough miss, in my opinion, that we need to go in a new direction,” he told the Senate Education and Health Committee on Thursday.

He has filed a bill to create an independent state agency, dubbed the Office of Medicaid Fiscal Oversight and Accountability, that would take over Medicaid’s forecast, oversee its expenditures and review the program’s fiscal impact, among other responsibilities. He said Thursday that it will not cost the state any additional funds because it will simply involve transferring the functions away from DMAS into the new office, which will still work under the governor’s direction.

The bill passed the committee on a party-line vote, and now heads to the Senate Finance Committee. Democrats didn’t necessarily hate the idea — they just thought it was coming too soon, and that lawmakers should give DMAS the chance to rectify the situation first.

Sen. Janet D. Howell, D-Fairfax, and Sen. George Barker, D-Fairfax, noted that DMAS has already started down the path to address the problems that caused the miscalculations in the first place.

“To me, this seems premature,” Howell said. “It may come to this at some point, but now I’d really like to give DMAS the opportunity to correct the errors of before.”

McDougle acknowledged that the shortfall did not originate with the current administration, and he said he understood where Barker and Howell were coming from.

“But the question is,” he says, “do you rely on the personalities in place who are working diligently to resolve the problem, or do you change it systemically to make sure that the system is set up so that, regardless of the personalities that are in place, it doesn’t happen again?”

The shortfall wasn’t entirely due to miscalculations on DMAS’ part. Part of it was caused by an unexpectedly high number of children enrolling in Medicaid, as well as the federal government’s request that the state pay back about $58 million because of a certification dispute, though the state is appealing that.

DMAS’ director, Dr. Jennifer Lee, outlined her agency’s plan to address the problems to the Senate Finance Health and Human Resources Subcommittee earlier this week.

It includes hiring an external consultant to do a review of its expense forecasting process; increasing transparency and accountability through publicly-accessible dashboards and a quarterly forecasting report to avoid blindsiding the state with an unexpected shortfall again; and strengthening its oversight of the health plans who provide services to Medicaid members.

“We do endeavor to strengthen those contracts and to ensure we’re getting the best value for every dollar we put into managed care,” Lee told the subcommittee.

It would also include adding a new Office of Quality and Population Health in DMAS and establishing an oversight committee.

A DMAS spokeswoman said the agency does not have a comment on McDougle’s proposed bill.