States Continue to Struggle With Medicaid Costs

PRINCETON, N.J.–States are still struggling with Medicaid costs
at the same time they are trying to expand the program’s coverage,
according to a report issued last week.

“State of the States,” a report issued by AcademyHealth, a
branch of the Robert Wood Johnson Foundation, found that states
continued to try to limit health care costs in 2005 while
initiating new coverage expansions.

“Times are still difficult for states and for coverage in
general,” said Alice Burton, director of AcademyHealth’s state
coverage initiatives. “No progress has been made to address the
uninsured in a comprehensive way at the national level, and the
numbers keep on rising. But, the silver lining is that state
leaders continue to be creative in finding new opportunities to
expand coverage.”

Although spending for Medicaid has decreased over the last three
years, growth for the health care program for the poor–funded
jointly by states and the federal government–averaged 7.5 percent
in 2005. Spending for Medicaid increased faster than state revenues
last year, and 26 states had Medicaid shortfalls compared to 22 in
fiscal 2004.

“From FY 1999 until FY 2004, K-12 education spending accounted
for the largest share of state spending,” the report noted. “Today,
Medicaid accounts for the largest and fastest-growing category of
state expenditures.”

Enrollment in Medicaid continued to grow in 2005, as states
faced fiscal challenges. Medicaid enrollment nationwide grew 4.2
percent in FY 2004 and increased an estimated 4.1 percent for FY
2005.

New and unexpected problems for the states last year included
Hurricanes Katrina and Rita. States “face serious challenges,
ranging from a backlog of expenditures and spending increases for
many programs due to the uncertain economic impact” of the two
hurricanes, the report said.

A federal reduction in Medicaid dollars could further exacerbate
state budget problems, the report said. The 2006 federal budget
reconciliation bill (see HomeCare
Monday, Jan. 17), set for a House vote on Feb. 1, would cut
Medicaid and the State Children’s Health Insurance Program by $6.9
billion over five years.