June 2, 2011
Medicaid continues to eat away at recovering state budgets as states anticipate lower tax revenues and more spending cuts. According to a new report from the National Governors Association and the National Association of State Budget Officers, Medicaid,which represents the single largest portion of state spending, accounted for 22 percent of total spending in fiscal year 2010, the last year for which data was available.
Meanwhile, the Medicaid rolls keep rising, as more Americans lose their jobs and health care coverage. Enrollment has increased by 8.1 percent during 2010 and are estimated to increase by 5.4 percent in 2011 and 3.8 percent in 2012, the report said.
States have taken measures to reduce the costs by including reducing provider rates, freezing provider rates, reducing fraud and abuse, and limiting spending on prescription drugs. In a desperate measure, Tennessee has cut more than 100,000 people from the plan. Despite these efforts, states expect to spend nearly 19 percent more or a record $15.8 billion of their general funds on Medicaid in 2012. In 2009 and 2010 states faced unprecedented declines in spending and tax revenue.
“We know that health care costs are growing faster than the economy,” said Dan Crippen, executive director of the governors association. ” Until we have a way of getting control of health care spending at large states will continue to face pressures on the Medicaid side.” Crippen added that costs will continue to rise inexorably because the rolls will continue to grow. Meanwhile, states are slashing billions on higher education, public assistance and K-12 education in order to eliminate a projected total deficit of $12.1 billion that must be closed by the end of fiscal 2011.
While fiscal year 2011 has been kinder to state budgets following two of the most difficult years since the Great Depression, 29 states forecast lower spending in fiscal year 2012 compared with 2008 and revenue collections remain 3.6 percent below 2008 levels, One reason for the lower forecast: in 2012 states will use only $2.8 billion from the 2009 American Recovery Reinvestment Act (ARRA) or stimulus bill which expires in fiscal year 2011. This is down from $60.7 billion in fiscal year 2010 and $51 billion in fiscal year 2011.
The report said states plan to spend $668.6 billion from their general fund expenditures in fiscal year 2012, which for most begins on July 1. However, general fund expenditures are $18.7 billion below the pre-recession high of $687.3 billion in 2008.
Although tax revenues have increased marginally, it's not enough to close the budget gap. As a result, governors have proposed $13.8 billion in new revenue through tax increases and fees and another $2.8 billion in other fund raising measures for fiscal year 2012. Weak state revenue collection along with demand for state services amounted to a $230 billion shortfall between 2009 and 2011. Although not all states have completed their budgets, 33 states are reporting $75.2 billion in budget gaps for fiscal year 2012 and 21 states are reporting $61.8 billion in budget gaps for fiscal year 2013. “We don’t expect revenue to keep pace with the bills coming in,” said Scott Pattison, executive director of the budget officers’ association.
States Plan Deeper Cuts and Higher Taxes (New York Times)
States See Uptick in Revenue, Costs (Wall Street Journal)
States Pour Money into Medicaid (CNN)