Virginia and the rest of the nation are bracing for seismic changes to Medicaid as a result of the federal “One Big Beautiful Bill,” passed by Congress on July 3, 2025, and signed into law by President Donald Trump the following day. The law, which has been described as the most significant overhaul to the U.S. healthcare safety net in over a decade, will reduce federal Medicaid spending by more than $1 trillion over the next decade, according to reporting from KFF Health News.
For Virginia, the stakes are particularly high. State officials, healthcare providers, and political candidates are now grappling with how to shield the most vulnerable residents from the fallout, especially as federal support shrinks and the state’s own rainy day fund becomes a focal point in the debate.
Lieutenant Governor Winsome Earle-Sears, the Republican nominee for governor, suggested in June that Virginia could tap into its rainy day fund to make up for Medicaid funding shortfalls. “We want to make sure that whatever happens with Medicaid, we have the money here to help. We have the money and the budget to help. You know, we have put money aside for rainy day,” Earle-Sears said at a Marion event, as reported by Cardinal News. “The bank account has never been that full. And so we are ready for any changes that happen.”
As of August 11, Virginia’s rainy day fund, officially known as the revenue stabilization fund, held about $4.7 billion. Created in 1992 to cushion the state during economic downturns, the fund is now at the center of a political tug-of-war over how to manage the looming $29 billion reduction in federal Medicaid support that Virginia could face over the next ten years, according to analysis by KFF.
The federal reconciliation bill is expected to slash Medicaid spending nationwide by $911 billion over the coming decade, with 76 percent of those cuts scheduled between 2030 and 2034, as detailed by KFF Health News. The impact will be felt by more than 71 million low-income and disabled Americans, and the repercussions in Virginia are already being tallied. The state’s Department of Medical Assistance Services projected that changes to the Medicaid Directed Payment Program alone would cost Virginia hospitals more than $24 billion in the long run, a figure reported to the General Assembly’s Joint Subcommittee for Health and Human Resources Oversight in July. The Virginia Hospital and Healthcare Association estimates that policy changes will cost state hospitals over $2 billion annually.
“Medicaid is vitally important in rural areas. Rural hospitals rely heavily on Medicaid to operate. The closing of a rural hospital would be devastating to a local community as we have already experienced in Southwest Virginia. It severely impairs a locality’s ability to attract, recruit, and retain businesses and new residents,” said Delegate William Morefield, a Republican from Tazewell County who sits on the House Appropriations Committee.
The threats extend beyond hospital finances. The Commonwealth Fund projects that nearly 500,000 healthcare jobs could be lost nationwide as a result of the reconciliation plan, including 13,200 in Virginia. Julian Walker, spokesperson for the Virginia Hospital and Healthcare Association, warned that the cuts could undermine hospital stability, public health, the healthcare safety net, the economy, and employment.
But is raiding the rainy day fund a real solution? Lawmakers on both sides of the aisle have reservations. Senator Creigh Deeds, a Democrat from Charlottesville and member of the Senate Finance Committee, said, “Use of the rainy day fund for a long term problem is contrary to the purpose of the rainy day fund.” Delegate Terry Austin, a Republican from Botetourt County, echoed the sentiment: “The idea of using Virginia’s rainy-day fund to cover potential Medicaid shortfalls, while technically possible, is probably not the best path forward.”
Virginia law also imposes strict limits on withdrawals from the fund. To access the money, the general fund forecast must show a deficit of 2 percent or less of tax revenue, and only half the fund can be withdrawn at a time. With the House and Senate money committees scheduled to receive a fiscal update from Governor Glenn Youngkin and Secretary of Finance Stephen Cummings on August 14, the debate over the fund’s use is only beginning.
The Medicaid crisis is not unique to Virginia. Ten states that have refused to expand Medicaid under the Affordable Care Act (ACA) are facing even sharper increases in healthcare costs and uninsured rates, according to KFF Health News. These states, including Florida, Georgia, and Mississippi, already spend less per Medicaid enrollee than the national average and offer fewer benefits. Now, as federal Medicaid funding shrinks and enhanced subsidies for ACA plans are set to expire at the end of 2025, millions more could lose coverage. KFF estimates that premiums for Obamacare plans could jump by over 75 percent if subsidies aren’t renewed, and up to 2.2 million people could become uninsured in Florida alone.
Nationwide, the Congressional Budget Office projects that 10 million people will lose Medicaid coverage over the next decade due to the new law. If enhanced subsidies for ACA plans expire, an additional 4.2 million people could become uninsured by 2034. The law also introduces new paperwork requirements for Obamacare enrollees, shortens sign-up periods, and slashes funding for navigators who help people find coverage—all changes expected to depress enrollment.
Starting in 2028, Medicaid payments to doctors and hospitals will be cut by 10 percentage points annually until they approach Medicare levels. While the budget law allocates a $50 billion fund to protect rural hospitals and clinics, KFF’s analysis found this would cover only about a third of the Medicaid cuts in rural areas.
In Virginia, Democratic gubernatorial candidate Abigail Spanberger is staking her campaign on defending Medicaid and broader healthcare access. Her platform calls for “cracking down” on pharmacy benefit managers, improving hospital price transparency, and stopping predatory billing practices. Spanberger’s campaign told Cardinal News that she would “use every resource at the commonwealth’s disposal to protect Virginians’ access to healthcare they can afford,” including working with the General Assembly and the Attorney General to defend critical programs and safeguard rural hospitals and clinics.
Meanwhile, the clock is ticking for insurers and consumers alike. August 13 marks the deadline for qualified health plans to submit rate changes to the Centers for Medicaid and Medicare Services for the federal marketplace. Already, 19 states and Washington, D.C., have proposed average premium increases of over 15 percent for 2026, according to Families USA’s executive director Anthony Wright.
As Virginia weighs its options—whether to dip into its rainy day reserves, seek new revenue, or make painful cuts—the choices made in Richmond will ripple through hospitals, clinics, and households across the state. For now, policymakers, healthcare leaders, and families are bracing for a storm whose full force is only just beginning to be felt.
