By Ralph Lindeman
Medicaid has been the largest single expenditure in state budgets in recent
years, accounting for nearly 24 percent of total state spending in fiscal year
2011, according to a report
released June 12.
In addition, the report by the National Governors Association (NGA) and the
National Association of State Budget Officers (NASBO) said state spending on
Medicaid increased by 20 percent in the next fiscal year, 2012.
At the same time, federal Medicaid spending declined by 8.2 percent in FY
2012 because of the expiration of enhanced federal matching funds temporarily
authorized by the American Recovery and Reinvestment Act of 2009 (ARRA), said
The Fiscal Survey of States.
Looking ahead, governors' proposed state budgets for FY 2013 project a slower
growth rate in Medicaid spending of 3.9 percent, the report said. Even with this
reduced growth rate, however, Medicaid is still outpacing overall general fund
expenditure growth in proposed state budgets, the report said.
“With the growth of Medicaid expenditures, spending priorities will again
face competition for state budget dollars this fiscal year,” NGA Executive
Director Dan Crippen said in a statement.
He added: “States have undertaken numerous actions to contain Medicaid costs,
including reducing provider payments, cutting prescription drug benefits,
limiting benefits, reforming delivery systems, expanding managed care and
enhancing program integrity efforts. These efforts alone, however, cannot stop
the growth of Medicaid.”
The continued growth in Medicaid spending is primarily the result of
increased enrollment due to the sluggish labor market and increased per capita
health care costs, the report said.
Medicaid enrollment increased by 5.1 percent during FY 2011 and 3.3 percent
in FY 2012, and it is projected to increase by 3.6 percent in FY 2013, the
The drop in ARRA funding has had a major impact on state Medicaid spending.
In FY 2010 and 2011, states had $112.8 billion in flexible emergency ARRA
funding, the report noted. Spending from these flexible funds peaked in FY 2010
at $61.2 billion and then fell slightly to $51.6 billion in FY 2011.
FY 2012 marked the first time since FY 2009 that states implemented spending
plans without enhanced federal Medicaid matching funds or substantial support
from ARRA's State Fiscal Stabilization Fund, the report noted.
In overall spending trends, the report said, states remain cautious about the
strength of the national economic recovery. “Fiscal trends indicate that while
aggregate state revenues will be about their pre-recession levels in FY 2012,
total budgetary spending will not yet surpass pre-recession levels,” the report
“The fiscal fallout from the unprecedented budgetary declines in FY 2009 and
FY 2010 puts states well below historical growth trends in general fund spending
and revenue,” the report added.
Fiscal year 2013 general fund revenue is expected to increase by about $27.4
billion, or 4.1 percent, while additional recommended spending is projected to
increase by $14.6 billion, or 2.2 percent, the report noted, suggesting that
states remain cautious about the strength of the national economic recovery.
Governors recommended general fund spending of $683 billion for FY 2013,
which is 2 percent over FY 2012, compared with a 3 percent increase over FY
2011, the report said. Governors proposed nearly $7 billion in new net taxes and
fees for FY 2013, according to the report.
“Despite some improvement in state budgets since the depths of the recession,
state budget growth is still significantly below average--growing less than half
the average growth of the past few decades,” NASBO Executive Director Scott
Pattison said in a statement.
The report is at http://www.nga.org/files/live/sites/NGA/files/pdf/FSS1206.PDF.