Blog | Wednesday, December 22, 2010

QD: News Every Day--Medicaid continues to stress state budgets

Governors and state budget officials are ending the year on a gloomy note, predicting that a downturn in state revenues will continue to cut Medicaid programs until overarching health care reform changes take effect in 2014.

The Fiscal Survey of States, by the National Association of State Budget Officers and the National Governors Association, outlines how the recession continues to cause declines in revenues and increased demands for services such as Medicaid and the Children's Health Insurance Program (CHIP).

In a rather staid manner for an alarming report, it begins, "After two of the most challenging years for state budgets, fiscal 2011 will present a slight improvement over fiscal 2010. However, even an improvement over one of the worst time periods in state fiscal conditions since the Great Depression states still forecast considerable fiscal stress."

Medicaid spending for fiscal 2010 is estimated at $353.8 billion, an increase of 8.2% percent over fiscal 2009, according to a previous report by the state budget officers. In fiscal 2010, Medicaid is estimated to account for 21.8% of total spending.

The recession drove Medicaid enrollment by an average of 8.5% in fiscal 2010, with states projecting Medicaid enrollment to grow by 6.1% in fiscal 2011, according to a Kaiser Commission report.

Meanwhile, states' revenues continue to lag behind the nation's economic recovery, "which itself has been slow to develop," according to the report. State revenues are forecast to remain well below their pre-recession 2008 levels, and in fiscal year, 2012 a significant amount of state funding made available by the federal economic stimulus package of 2009--$151 billion in flexible emergency funding--will no longer be available.

Medicaid spending, similar to the health care spending, is projected to increase faster than the economy as a whole. Projections over the rest of the decade are projected to rise at an average annual rate of almost 8% due to a growing aging population as well as changes made in the recent health care legislation.

To control the gap between revenue and spending, nearly every state implemented at least one new Medicaid policy to control spending in fiscal 2010 and fiscal 2011, most likely provider cuts, according to the Kaiser Commission on Medicaid and the Uninsured’s 2010 annual survey.

Finally, while the major expansions to cover the uninsured will not be taking place until Jan. 1, 2014, other changes under national health care reform are affecting health care in states more immediately, including:
--the maintenance of effort provisions for Medicaid and CHIP,
--a new option to cover childless adults in Medicaid using the regular Medicaid match,
--changes to drug rebates under the Medicaid program,
--new long-term care options for community based care, and
--the establishment of temporary high risk pools in each state until the exchanges are operational, and changes in the insurance markets in every state.