Virginia ranks among the 10 slowest states for processing Medicaid applications. A 2024 state-commissioned study found that the state’s eligibility systems are outdated and inefficient, making upgrades costly and difficult.
With new federal rules requiring states to track enrollees’ work hours and conduct twice as many eligibility checks each year, Virginia is facing a potentially steep price tag to comply.
Currently, only 11% of the state’s local social service agencies complete the majority of applications within the federally required 45-day timeline, according to the study. Virginia is one of just seven states to use a decentralized model; everywhere else, Medicaid applications are handled at a single state office. Here, 120 local agencies manage eligibility determinations, but each faces different levels of funding, staffing and training. Many are overwhelmed, the study found.
The state’s outdated IT system compounds the problem. Built in the late 1990s, it lacks flexibility, cannot easily be updated and is not user-friendly, the study said. More applications must be processed manually, creating an even heavier workload for local staff.
The new federal requirements will demand that Virginia speed up eligibility processing, prevent wrongful terminations and handle larger caseloads. The state has no system in place to process the paperwork tied to new work requirements, and a new rule requiring eligibility checks every six months will add yet another layer of strain to an already overburdened system.
Meeting those requirements will require new technology infrastructure and additional staff and will cost “many millions of dollars,” said Del. Sam Rasoul, D-Roanoke, who sits on the House Health and Human Resources subcommittee.
The exact financial impact remains unknown until the federal Centers for Medicare and Medicaid Services (CMS) release guidance on how to carry out the changes. Such rules must be issued at least by June 2026, but state leaders are hoping to receive it sooner: The federal requirements are set to take effect in January 2027, giving states limited time to develop, test or change their systems.
Some states may be eligible for delayed implementation as long as the state demonstrates a good faith effort to comply. The deadline for those states would be no later than Dec. 31, 2028.
As Virginia prepares to implement new federal Medicaid requirements, Del. Wendell Walker, R-Lynchburg, emphasized both the challenges ahead and the importance of ensuring that Medicaid benefits remain accessible to his constituents. Walker serves on the House Health and Human Services Committee.
“The federal government has set these new Medicaid requirements, and as legislators our job is to ensure Virginia is prepared to comply. I believe we are capable of meeting the standards on the timeline provided, but we will probably need to evaluate the funding and workforce needs as we move forward,” Walker said.
“At the same time, it’s important that the program continues to serve the people in my district it was designed to protect. As we adapt to these changes, my priority is making sure those populations continue to receive the care and support they need.”
Burden on local social services
In 2024, Virginia allocated $1 million to study and evaluate its Medicaid eligibility and determination system. The report, published in December, did not account for the recent federal changes, which were rolled out months later, but its findings still apply, according to Emily Hardy, deputy director of the Center for Healthy Communities with the Virginia Poverty Law Center. The center is a nonpartisan, nonprofit organization that advocates for the civil legal rights of low-income Virginians.
“The study speaks to the larger system issues which are currently applicable, but will also make the new changes harder to do for Virginia because we have these underlying system issues. So we’ll have more expensive system changes,” Hardy said.
Virginia expanded Medicaid in 2019, just before the COVID-19 public health emergency. During the pandemic, federal rules required continuous eligibility, allowing enrollees to keep coverage without annual renewals. Enrollment also swelled due to high unemployment.
Between 2017 and 2024, Medicaid enrollment increased from 1 million members to 2.1 million, according to the study.
Even as Medicaid enrollment has surged, staffing at social services agencies has grown by only 5%. In 2024, there were 3,556 benefit employees working for local social services and 2.1 million Medicaid enrollees, according to the study.
These agencies also manage benefits for SNAP, government assistance for buying food, and TANF, a benefit program that helps low-income families with children cover essential needs like rent and utilities. Agencies also manage other social services responsibilities. As a result, these services are stretched thin.
Federal regulations have required states to process Medicaid applications within 45 days since the Affordable Care Act was implemented in 2010. Last year, 19% of applications in Virginia exceeded the 45-day limit, and only 21% were processed within 24 hours — far below the national average of 44%. If these processing times worsen, CMS could place Virginia on a federal corrective action plan, which may carry financial penalties.
Having local social services manage eligibility makes it difficult to consistently apply processes across the state, Hardy said.
“These are really, really difficult-to-access programs, really difficult to understand [for local social services staff]. These rules are just making them harder to access and understand,” Hardy said. “It’s going to be a lot of training and a lot of knowledge we’re requiring of people for a job that often doesn’t pay sufficiently.”
Starting Oct. 1, 2027, eligibility redeterminations will occur every six months instead of once a year. Cheryl Roberts, director of the Department of Medical Assistance Services, said during a meeting with lawmakers last month that this change will significantly increase local DSS workloads and could drive up Medicaid “churn,” where people lose coverage but re-enroll within a year.
“That’s a big step. It’s going to be hard, in terms of the types of resources it’s going to take,” Roberts said.
Someone who loses Medicaid coverage due to a processing error also loses the ability to access subsidized health plans through the Virginia Insurance Marketplace. That’s because the marketplace automatically checks for Medicaid eligibility. If the system determines that the person is eligible for Medicaid, even if they aren’t enrolled, it will block them from enrolling in subsidized marketplace coverage.
A clerical mistake or delay in processing can leave a person stuck in a coverage gap, unable to use Medicaid and unable to qualify for affordable marketplace plans, with no clear pathway to immediate reinstatement.
It’s likely that rural places, like Southwest and Southside Virginia, will experience a greater impact, according to Rasoul. Rural communities lack the wraparound services to support people during lapses in coverage.
“The reality is that with the massive cuts coming from the federal government, the states will not be able to largely take care of people. These are cuts that we know an overwhelming majority, we will not be able to help. … Because we do not have the investment in community wrap-around services that wealthier communities already have,” he said. “Some of the wealthier urban communities can absorb some of the impacts locally better. In our rural communities, that infrastructure doesn’t exist.”
Lawmakers Del. Bobby Orrock, R-Spotsylvania County; Sen. Chris Head, R-Botetourt County; and Sen. Todd Pillion, R-Washington County, did not respond to questions about the state’s ability to build a system to support redetermination and work requirements, or about capacity at local social services agencies. Each of these legislators serves on health-related General Assembly committees.
Sen. David Suetterlein, R-Roanoke County, said that the Education and Health Committee he serves on rarely addresses Medicaid finances.
Virginia’s Medicaid benefit IT systems are from the 1990s
When the state began implementing changes required by the ACA, it added on to its old processing systems instead of building a new one.
These systems were considered best-in-class for their time but lack the flexibility needed to meet modern demands of the Medicaid system, according to the 2024 study.
Medicaid enrollees often submit their applications manually because the online portal is difficult to use. They often call local social services departments or mail in their documents rather than using automated systems.
According to the study, about 34% of Medicaid applications were submitted by paper between January and July 2024. About 26% were submitted by phone and 40% digitally.
Roberts said that the state’s goal is to automate as much of this process as possible, especially when it comes to tracking work hours.
Implementation costs could range from $10 million to $250 million
While states wait for guidance from CMS, many questions remain. Data from states that ran Medicaid work requirement demonstrations in 2019 show that oversight and administration costs vary widely, according to a report by the U.S. Government Accountability Office.
Five states that participated in work requirement demonstrations reported a broad range of implementation needs, from major IT system overhauls to processing changes for large enrollee populations. Cost estimates ranged from about $10 million to more than $250 million. The scale of the IT upgrades and the number of participants were likely the biggest cost drivers.
These estimates did not capture all expenses, such as the ongoing costs states anticipated throughout the demonstration period.
Georgia, the first state to implement work requirements for the Medicaid expansion population before the federal changes, has spent more than $100 million in administrative costs since it started building the program in 2021. Only about $26 million has gone to health care benefits for beneficiaries, according to a KFF analysis.
The requirements outlined in the federal spending bill call on states to use data-matching — using information such as payroll and other data to track an individual’s work hours and employment history — a task that may prove to be a significant challenge for many states, according to a KFF analysis. Data-match capabilities will also be essential to record residents’ exemption status.
A state’s data-matching capacity will likely determine how many people must submit proof of work hours and how many risk losing coverage. States with outdated, fragmented systems will face the steepest challenges.
Health centers might be able to help
Federally qualified health centers, which are low-cost community health facilities that receive funding from the federal government, are hoping for a spot at the table, according to Tracy Douglas, CEO of Virginia Community Healthcare Association.
Douglas has already reached out to government officials to offer her expertise and explain the role FQHCs could play.
These health centers serve uninsured and underinsured patients by offering care on a sliding scale based on individual income. They already collect some information from patients about income level and employment, making them a sensible access point for developing work requirement processes, Douglas believes.
FQHCs serve about 400,000 individual patients across the state with a wide range of insurance plans including traditional Medicaid, Medicaid expansion and marketplace plans.
