Report: Rising Medicaid Costs Threaten Many State Budgets

Mounting fiscal pressures from rising health care costs, among other factors, could cause severe budget shortfalls for state governments nationwide, according to a report released Wednesday by the National Governors Association and the National Association of State Budget Officers, the AP/Asbury Park Press reports (Welsh-Huggins, AP/Asbury Park Press, 12/5).

According to the report, Medicaid spending from all funding sources in fiscal year 2007 is estimated to increase by 7.3%, compared with a growth rate in FY 2006 of 1.7%.

A significant factor in the increase stems from the provision of prescription drug benefits to beneficiaries who are dually eligible for Medicare and Medicaid. Under the Medicare prescription drug benefit, dual-eligibles now receive their drug benefits through Medicare, and states finance those benefits through payments to the federal Medicare Trust Fund. Those payments are projected to amount to about 5% of state Medicaid expenditures, according to the report.

The report says that Medicaid costs total about 22% of states' budgets, while overall health care costs make up about one-third of spending -- the single largest segment of state budgets. According to CQ HealthBeat, other health care challenges for states include access for the uninsured, rising health costs and higher utilization of services. The report says that the increase in the population of elderly people, budget cuts for public health programs and reductions in medical staff are adding to pressures on states.

In addition, governors are expressing concern about delays in the reauthorization and expansion of the State Children's Health Insurance Program, CQ HealthBeat reports. NGA Executive Director Raymond Scheppach said any reauthorization and expansion of the $5 billion program should include an additional $1.6 billion to help states cover budget shortfalls (Carey, CQ HealthBeat, 12/5).