Medicaid costs still leaving states in deep debt

States welcomed Obama's proposal for six more months of extra federal Medicaid funding, but their budget woes might outlast the assistance.

By Doug Trapp — Posted Feb. 15, 2010

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Although Congress is moving on President Obama's proposal to extend higher levels of federal Medicaid funding by six months, some states might need help for much longer.

Obama's Feb. 1 budget request would provide $25.5 billion to continue enhanced Medicaid support through June 2011 that otherwise would expire at the end of 2010. Governors, state Medicaid directors and others have said the original $87 billion provided in the most recent stimulus act has been a key to sustaining their Medicaid programs.

The House on Dec. 16, 2009, adopted a six-month funding extension as part of the Jobs for Main Street Act. The Senate has not voted on the bill, but Sen. Jay Rockefeller (D, W.Va.) and Senate Majority Leader Harry Reid (D, Nev.) announced on Feb. 3 that they are working on a separate bill to do so.

"We absolutely need this six months of relief while we weather this economic storm. Too many families depend on this program for us to allow a shortfall of funding," said Rockefeller, chair of the Senate Finance subcommittee on health care.

Long-term red ink

At least 13 states already anticipate that their Medicaid spending for fiscal 2010 -- which began in July 2009 for most states -- will be more than what they budgeted, according to a survey that was conducted in November by the National Conference of State Legislatures.

The number of children in Medicaid and CHIP spiked by 2.6 million between October 2008 and September 2009, to reach nearly 40 million, according to Dept. of Health and Human Services figures released Feb. 4. Of these new enrollees, 2.2 million signed up for Medicaid.

A six-month extension of Medicaid funding would provide another $2.1 billion to California, according to H.D. Palmer, spokesman for the California Dept. of Finance. The extension is part of a $6.5 billion package Gov. Arnold Schwarzenegger is seeking from the federal government to help plug a $20 billion fiscal 2010 budget deficit.

Schwarzenegger also wants additional control over the Medicaid program. Courts have ruled that Medicaid cuts enacted by the state -- including physician payment cuts -- violated federal law.

New York's Medicaid program was $100 million beyond its fiscal 2010 budget in January, a deficit that could reach $400 million by the end of fiscal 2011, according to a Feb. 3 statement by Gov. David Paterson. Medicaid enrollment in the state reached a record 4.2 million people in October 2009, 13% above the previous record of 3.7 million from August 2005.

Medicaid is the single largest cost driver in Florida's budget, according to Chris Cate, spokesman for Gov. Charlie Crist. Extending enhanced Medicaid funding for six months is imperative, he said, but forecasting the state's needs beyond fiscal 2011 is premature.

Some states might continue to face Medicaid-driven budget deficits beyond June 2011, bringing up the possibility of program cuts.

Although the latest recession might have ended in late 2009, "state finances tend not to bottom out until 10 to 24 months" after the end of a national recession, said Arturo Perez, a fiscal analyst with the National Conference of State Legislatures.

High joblessness levels would keep Medicaid enrollment high as well, said Joy Johnson Wilson, health policy director for the NCSL. Unemployment is expected to remain near 9% through 2012, according to Congressional Budget Office projections released in January.

"The thing that would help states most would be more people being employed and receiving health insurance," Wilson said.

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Facing deficits

Thirteen states reported in November 2009 that they expect significantly higher spending on Medicaid than budgeted for fiscal 2010, which began in July 2009 for most states:

Colorado, Florida, Idaho, Maine, Maryland, Nevada, New Jersey, New Mexico, North Carolina, Vermont,Virginia, Washington, Wyoming

Source: National Conference of State Legislatures "State Budget Update: November 2009" (link)

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