Accounting errors in health agency on track to cost Washington state $654 million

The agency was notified of the federal funding problem in January 2024 but failed to alert lawmakers or the governor’s budget office, according to legislative correspondence obtained by The Center Square.

State Sen. Chris Gildon, R-Puyallup, questioned whether the agency concealed the problem involving the Children’s Health Insurance Program, or CHIP, which covers children whose families earn too much to qualify for Medicaid.

“All of this, it appears, has been swept under the rug, not brought up to the governor, not brought up to the budget writers, and it’s a $650 million dollar blunder,” Gildon told the outlet.

According to Axios, HCA underreported its CHIP spending to the federal government from 2020 through 2025. Because of that reporting error, federal officials began reducing Washington’s annual funding allotment in fiscal year 2024.

Senate staff estimate the allotment fell from roughly $250 million annually to about $133 million. However, Washington continued drawing enough federal money to cover its actual program expenses, exceeding the reduced allotment and creating federal overpayments.

Federal officials alerted HCA in January 2024. According to a legislative staff email, lawmakers and the governor’s budget office continued assuming approximately $250 million in annual federal funding because HCA did not notify them.

Gildon said budget writers learned about the issue roughly a month before his Nov. 6 interview. The legislative staff estimate includes approximately $100 million in repayments for previous years, plus projected future funding losses. His allegation that the problem was deliberately concealed has not been independently established.

HCA disputes the $654 million projection, arguing that staff used inappropriate comparisons and incorrectly assumed the reduced federal allocation would remain unchanged. Federal allotments are recalculated annually.

The agency and Office of Financial Management estimate a potential $54 million federal CHIP funding shortfall in fiscal year 2027 if the allocation is not corrected. HCA says it is working with federal officials to resolve the problem.

“There may be little or no impact in future years once that process is complete,” HCA spokesperson Katie Pope told Axios.

Senate budget chair June Robinson, D-Everett, told Axios that lawmakers might need to allocate approximately $100 million in the upcoming two-year budget to address the issue. She described the larger figure as a rough estimate of potential obligations over several years, rather than an immediate bill.

The financial uncertainty comes as Washington faces an anticipated multibillion-dollar budget shortfall. At a Nov. 4 press conference, Gov. Bob Ferguson declined to provide an exact figure but said it was “more than fair to say that number is going to start with a ‘B.’”

Washington’s current two-year operating budget totals $79.4 billion.