Lower State Medicaid Spending Contributes to Budget Surpluses

More than 40 states have budget surpluses this year, in part because of reductions in Medicaid spending growth, which has decreased from an annual rate of 11% to about 7% within the past few years, the New York Times reports. Higher-than-expected tax increases and growth in local economies also contributed to the state budget surpluses, which have reached their highest level since 2000.

Many states plan to use budget surpluses to address expensive, long-term problems, such as the issue of the uninsured.

According to a report from the National Governors Association and the National Association of State Budget Officers, two-thirds of governors have plans to expand access to health insurance in fiscal year 2008, in large part through expansions of public programs and employer mandates.

For example, a bill under consideration in Wisconsin would provide health insurance for all children in the state by 2010 through an expansion of public programs to those in families with annual incomes less than 300% of the federal poverty level by January 2009 and discounted coverage for those in families with higher incomes.

In addition, a bill under consideration in Oregon would use the state budget surplus and an 84.5 cents-per-pack increase in the state cigarette tax to increase funds for a public health insurance program for children by $60 million. NGA estimated that in FY 2008, state spending on health insurance expansions will total $18.4 billion, which includes funds from the federal government (Steinhauer, New York Times, 6/11).