Medicaid

Bankrupting State Budgets

As a federal/state partnership program Medicaid is intimately woven throughout all governmental budgets. In fact, Medicaid is the single largest expense category in state fiscal budgets.Thus, rising costs or unsustainable growth not only threatens our federal deficit but could also force states to cut back services or increase taxes. Unlike Medicare and Social Security, Medicaid is funded out of general revenues on an as-needed basis.Although this pay-as-you-go system ensures financial balance any growth in costs necessarily squeezes other parts of the budget.

The latest data from the Center for Medicare and Medicaid Services shows that the government spends $339 billion per year – up from $14 billion in 1980.This incredible growth is projected to continue. Prior to the enormous expansion of the program as a result of health care reform’s passage, CMS estimated that the cost of the program would reach $674 billion in 2017. In growing twice the rate of inflation, Medicaid’s share of the gross domestic product (GDP) was projected to reach more than 3% by 2017.

Cash strapped states are ill equipped to handle such consistent and enormous increases in their budgets.To control costs they must either cap enrollees or cut reimbursement rates. Opting for the latter option has forced more than 30% of all physicians to refuse to accept any new Medicaid patients – which often cost money to treat.

Health care reform will only make these statistics worse. Of the 32 million Americans expected to gain coverage under the law – 20 million will be insured by Medicaid. But can the federal government, and more importantly states, handle the addition to their bottom line? History tells us no.