State Budget Crises Mount as Medicaid Rolls Soar

Although Florida’s once booming population has leveled off, its roll of Medicaid recipients has soared by nearly 50 percent in the last three years, exacerbating an already dire state budget crisis.

The recession and an 11.5 percent unemployment rate are at the heart of Florida’s problem, as hundreds of thousands of mostly low-income women and children have turned to the government funded program for health care.

The number of Sunshine State residents claiming Medicaid benefits rose from 2 million to 2.8 million since 2007, and Florida’s Medicaid spending has climbed roughly a quarter a year for the past two years, to more than $20 billion. In both cases, these growth rates are double the national average, according to the National Governors’ Association (NGA) and National Association of State Budget Officers (NASBO).

Even before the recession struck, then GOP Florida Gov. Jeb Bush tried to trim the state’s Medicaid program by expanding managed care and patient choice in several counties. Now, the combination of a stubbornly bad economy and the anticipated exhaustion of emergency federal assistance dollars provided through the federal stimulus package create a very serious challenge for Florida, Phil Williams, Florida’s assistant deputy secretary for medicaid finance, told The Fiscal Times.

A Nationwide Problem

While Florida has been particularly hard hit, the state is hardly unique. Nationally, the number of Medicaid beneficiaries has risen by 8 percent a year since 2008, and 44 states have reported that they will exceed their enrollment and spending growth projections this year, the Kaiser Commission on Medicaid and the Uninsured reported. A dozen other states, including Arizona, Utah, Wisconsin and Maryland, have experienced double-digit annual enrollment increases, while the Medicaid spending growth of California and New York, at 24 percent and 16 percent, respectively, has outpaced Florida’s.

All of this is set against the backdrop of severe budget deficits in most states, most of which are required to balance their budgets. Cumulative state budget shortfalls for 2010 and 2011 are estimated at $350 billion, which has prompted unprecedented cuts averaging 12 percent since 2008.

“Everything has been cut – higher ed, central administrative funding, state parks, and virtually any function that’s not K-12 education or health care,” Stacey Mazer, a NASBO official, said.

The Looming Crisis

Medicaid, the $360 billion a year federal-state health program that serves more than 60 million low-income Americans, has emerged as a central factor in the states’ budget and financial crisis. But an even more severe crisis looms ahead, given the steady rise in health care costs, together with higher, recession-induced demand for Medicaid benefits, and the end of $103 billion in federal stimulus aid to states by mid-2011.

In the absence of major reforms and a robust economic recovery, the potential consequences of the growing state Medicaid squeeze are substantial, experts say. States may slide deeper into the red, affecting bond ratings and making it more difficult for them to borrow. Deep cuts in kindergarten through grade 12 and higher education spending could make recent teacher layoffs seem relatively trivial. Sharp state tax and user fee increases may be inevitable. Even some anti-big government conservative governors may be forced to seek additional federal aid. And health care for the poor – the basic function of Medicaid – may suffer.

Unlike the nation’s two other premier entitlement programs, Social Security and Medicare, which are wholly federally funded, Medicaid was established in 1965 as a joint federal-state program administered by each state. Until the recession, the federal government provided about 57 percent of Medicaid funds, with a higher percentage going to needier states.

A Bigger Federal Role

However, under the 2009 economic stimulus package approved by Congress, the federal government allocated $87 billion to help states with Medicaid funding through 2010, raising the federal share to about 66 percent. In Florida, the federal percentage rose from 55 percent to 68 percent. On Aug. 10, President Obama signed the $26 billion Education, Jobs, and Medicaid Assistance Act, extending $16 billion in federal aid through next June. If not for federal stimulus aid – overwhelmingly for Medicaid and education – many states would have had to eliminate even more services and jobs.