State Budgets Improve, But Medicaid Program Costs Still Increasing
After three years of "fiscal crisis," the improving national economy is beginning to "lift states' fortunes," but "[r]apidly rising health care costs" from programs including Medicaid are still "squeez[ing] other priorities," according to a report released Thursday by the National Governors Association and the National Association of State Budget Officers, the Philadelphia Inquirer reports (Thomma, Philadelphia Inquirer, 12/5). To address budget deficits, the states cut $25.5 billion in spending over fiscal years 2002 and 2003 (AP/Richmond Times-Dispatch, 12/5). At the same time, they raised taxes by nearly $20 billion. The report found that despite the spending cuts, Medicaid costs rose 23% over the last two fiscal years (Philadelphia Inquirer, 12/5). According to the report, Medicaid remains accountable for about 20% of state spending, the Los Angeles Times reports. The report found that all 50 states have frozen or cut Medicaid reimbursements to doctors and hospitals, as well as limited spending on prescription drugs. Thirty-four states have restricted enrollment; 32 have reduced benefits; and 32 have increased the amount beneficiaries must pay for medical services and drugs (Kemper, Los Angeles Times, 12/5). More than 30 states are expecting a shortfall in their Medicaid budgets this year, the report found (AP/Richmond Times-Dispatch, 12/5).
Scott Pattison, executive director of NASBO, said that Medicaid spending growth is projected to continue, perhaps increasing as much as 5% this year. Pattison added that state lawmakers could have to make further Medicaid cuts, make "disproportionate cuts elsewhere or ... raise taxes" (Los Angeles Times, 12/5). The report also found that the states' tax structures, which were built around a manufacturing economy instead of today's service-based economy, are preventing states from maximizing revenues, the Inquirer reports. For the third quarter that ended Sept. 30, state revenues increased 4.5%, but the national economy grew at 8.2% during the same period. While the "crisis has eased somewhat, ... [w]e're only getting 50% of the growth," Raymond Scheppach, executive director of the NGA, said (Philadelphia Inquirer, 12/5). The report is available online. Note: You must have Adobe Acrobat to view the report.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.