On April 27, the Legislature passed its final budget for the 2025-2027 biennium, and Sunday, April 27 was the last day of the legislative session. WSHA published an Inside Olympia yesterday with information about the results of priority budget and revenue legislation and its impact on hospitals and health systems. This Inside Olympia has additional details about the final spending package in the budget.  

The final budget spends $78 billion in state funds and $150 billion in total funds over the two years, between July 1, 2025, and June 30, 2027. This includes over $9 billion in new taxes to fill a large deficit. The Legislature prioritized funding for special education and ensured that Gov. Inslee’s public employee contract negotiations remained intact. 

WSHA is disappointed that many of the budget cuts were in health care and long-term care. This includes the $100 million per year in cuts to hospital payment rates in public and school employee health care contracts (PEBB/SEBB). Medicaid managed care organizations (MCOs) contracts are being reduced by 1%, which may result in payment reductions for providers in contract negotiations. Additionally, several post-acute and long-term care programs that WSHA had supported to address the complex discharge population were also cut.   

Significant budget items are outlined below. For more details, see WSHA’s 2025 Budget Comparison Table. 

Budget items significant to hospitals and health systems

WSHA persistently advocated against budget cuts impacting hospitals. While we were able to ameliorate the total impact, many cuts were enacted. 

  • ($50 million GFS/Total) cut from PEBB/SEBB payments to hospitals by capping payments at the lesser of contracted rates or 200% of Medicare beginning in January 2027. This only includes six months of the biennium. Ultimately, this will result in $100 million in cuts per year for the impacted hospitals. WSHA was able to negotiate removal of a mandate to contract with PEBB/SEBB plans and an automatic step-down to 190% of Medicare rates in 2029, as well as an exemption for independent rural hospitals. 

  • ($1.5 million GFS/$5 million Total) cut to eliminate reimbursement for hospital ancillary services (labs, therapy, etc.) for patients on administrative day stays. This reverses legislation passed in 2023. 

  • $111,000 GFS/$36.7 million Total to fund the Medicaid Access Program, a directed payment program to increase professional payment rates to equivalent Medicare level. Assessments are levied on MCOs and commercial carriers. WSHA is pleased that this was funded, though there is some uncertainty that the program will be approved by the federal Centers for Medicare and Medicaid Services (CMS). Once approved by CMS, increases for professional services would start in 2028. 

  • $84,000 GFS/Total to continue funding for a cohort of eight students in the Rural Nursing Education Program. 

  • $2.6 million GFS/$4 million Total to extend the 1580 care team for children stuck/abandoned in hospitals. 

Budget items with significant impact to health care

WSHA was pleased to see two health care coverage programs that we supported receive funding—the Apple Health Expansion and Washington Health Benefits Exchange subsidies. We were disappointed to see the 1% rate cut to Medicaid MCOs for both physical and behavioral health benefits. 

  • $142.3 million GFS/Total to continue funding at current level through the 2025-2027 biennium for a Medicaid-like program for enrollees that do not qualify for Medicaid or exchange subsidies due to immigration status but meet income requirements. 

  • $30 million GFS/Total to continue the Cascade Care premium payment subsidy program through CY 2026 for individuals enrolled in the Health Benefits Exchange. 

  • ($32.1 million GFS/$106.2 million Total) to reduce the Medicaid managed care organization capitation rates for physical health services by 1%, effective Jan. 1, 2026. 

  • ($9.2 million GFS/$27.7 million Total) to reduce behavioral health capitation rates for Medicaid MCOs are reduced by 1%. 

Behavioral health

Behavioral health had mixed results in the budget. WSHA is disappointed about the significant cuts to long-term civil commitment beds but was pleased to see funding for community behavioral supports and 23-hour crisis relief center start-up costs. 

  • ($33.4 million GFS/$32.5 million Total) cut from long-term civil commitment beds for individuals on 90/180-day holds in community settings. 

  • $72.4 million GFS /$143.3 million Total to fund community behavioral health supports. 

  • $15.4 million GFS/Total to fund 23-hour crisis relief center start-up costs, costs for non-Medicaid enrollees and operational costs.  

Complex discharge 

In the last several budgets, WSHA made significant progress on funding programs to assist with the complex discharge population. Unfortunately, several of these programs and long-term care capacity faced cuts in this biennial budget. 

  • ($5.3 million GFS/$10.6 million Total) increases in DSHS case management ratios for hospital discharge, residential and residential service waiver caseloads.   

  • ($57.1 million GFS/Total) in significant increases in annual licensing fees for nursing facilities, adult family homes and assisted living facilities.   

  • ($10 million GFS/$20.1 million Total) to reduce specialized behavioral supports in adult family homes. 

  • ($3 million GFS/$6 million Total) to reduce capacity in enhanced service facilities.