‘Budget Crunch’ Forces States to Reduce Health Spending

After six years of economic "good times," states are facing a "budget crunch" this year that has left officials "staring at red ink" and has forced reductions in health care programs, the Los Angeles Times reports. "Slumping" tax revenues and "soaring" costs, a "potent double-whammy," have hampered a number of state initiatives, including health care programs. This year, 16 states have reduced spending mid-year, compared to one state last year, and at least seven states have imposed "across-the-board spending cuts." Some states also have "tapped money" from their shares of the national tobacco settlement -- a "onetime windfall often earmarked, with much hoopla, for public health" -- to cover costs for other, non-health care-related programs. "When things go bad, they usually go bad fast," Nicholas Jenny, a senior policy analyst at the Rockefeller Institute for Government in Albany, N.Y., said. Although declining tax revenues have hurt states, budget analysts said that "out-of-control" Medicaid spending represents the "biggest culprit." Medicaid represents about 20% of states' spending, and costs for the program will likely increase about 8.6% annually for the next 10 years, the National Association of State Budget Officers said. The "quick" rise in Medicaid costs "surprised" many state budget analysts, the Times reports. According to the National Conference of State Legislatures, 23 states "underestimated" Medicaid costs in their budgets last year (Simon, Los Angeles Times, 8/19).