Medicaid Costs Remain Problem Despite Increased State Revenue, Report Finds
State revenues "improved dramatically" in fiscal year 2005 -- primarily from increased sales and income taxes -- but Medicaid costs are expected to continue increasing by 9% to 10% annually, which could create the need for future cuts in other programs, according to a report from the National Governors Association and the National Association of State Budget Officers released Thursday, the New York Times reports.
The report states, "In fiscal 2005, revenues exceeded original budget projections in 42 states, and five others met their targets. Only three states' revenues were below their budget projections" (Pear, New York Times, 7/8). However, NGA Executive Director Ray Scheppach said, "Medicaid and health care continue to be a crisis at the state level" (Tanner, AP/Seattle Post-Intelligencer, 7/8).
Twenty-four states reported Medicaid budget shortfalls in 2005, compared with 20 in 2004, the survey found. Enrollment increases -- averaging 8% since FY 2000 -- played a "major role" in increased Medicaid spending, CQ HealthBeat reports. Families and children accounted for the "greater part" of the enrollment increase, but the elderly and disabled "accounted for a greater share of rising costs," according to CQ HealthBeat (CQ HealthBeat, 7/7).
Scheppach predicts more individuals will qualify for Medicaid in the future as fewer employers offer health insurance coverage to workers. Federal and state spending on Medicaid now is more than $320 billion annually, and the Congressional Budget Office expects program costs to increase by 7.8% per year -- "significantly" lower than NGA's estimate of 9% to 10%, the Times reports.
According to the Times, funding problems for programs including Medicaid might "be more manageable with the rebound of state revenues," but "[s]tates are cautious about the fiscal outlook over the next five or 10 years."
Scheppach said it is likely that "you will see cuts in higher education" to fill in Medicaid budget gaps unless states are given more flexibility to control costs in the program (New York Times, 7/8). He added that it is "critical" that Congress by September adopt NGA-endorsed Medicaid reforms, including added copayments, asset transfer reduction, pharmaceutical reimbursement charges and the ability for states to alter benefits.
"If it doesn't happen then, then I think it's going to be unlikely for the next couple of years," he said. Scheppach warned that Medicaid's "tipping point ... is at the next economic downturn," noting that although there is "a strong economy now, ... at some point it is going to slow," which could force states to make further cuts to Medicaid coverage and benefits. Additionally, Scheppach expects governors will look beyond Medicaid to reduce health costs and improve health care quality through measures such as providing consumers with more data to inform their health care decisions (CQ HealthBeat, 7/7).
The report is available online. Note: You must have Adobe Acrobat Reader to view the report.