Medicaid Costs Drive States’ Fiscal Crises, Survey Finds

Declining revenue, a weak economy and "upward spiraling" health care costs have propelled states into a "worsening fiscal crisis," a survey released yesterday by the National Governors Association and the National Association of State Budget Officers found, the New York Times reports. Thirty-seven states have cut a total of $14.5 billion from the current year's budgets, and governors in 29 states have proposed $17.5 billion in new taxes and fees, such as increased cigarette taxes, the survey says. Many states have cut services across the board. To balance budgets, 14 governors have proposed increasing cigarette taxes and six have proposed increasing alcohol taxes; it remains unclear if the plans will be enacted, the Times reports. Total state spending is expected to decline by 0.1% next year -- compared to an increase of 0.3% this year -- in the first drop since 1983, according to the Times (Wilgoren, New York Times, 6/27). "[S]harply" rising Medicaid costs have contributed to the situation, the Washington Post reports. Overall, Medicaid represents about 20% of state budgets; spending for the programs increased 13% in 2002, rose 8% this year and is projected to increase 4.9% in 2004, according to the survey. Although governors have asked for increased federal aid because they say $40 billion of states' Medicaid spending pays for care for the elderly and people with disabilities, Congress is not expected to consider Medicaid reform until at least next year (Russakoff, Washington Post, 6/27). California and New York currently spend more than any other states on their Medicaid programs, the Albany Times Union reports (Freedman, Albany Times Union, 6/27). Ray Scheppach, executive director of the NGA, said, "Medicaid is becoming the Pac-Man of state government, eating up each additional dollar generated in revenue," adding, "If enrollment rates go up and drug costs go up, then the only way to afford to program is to cover fewer people" (Washington Post, 6/27). The survey is available online.