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U.S. states scramble to cover Medicaid costs, some face overruns
December 18, 2012 / 7:15 PM / 5 years ago

U.S. states scramble to cover Medicaid costs, some face overruns

Dec 18 (Reuters) - Rising healthcare costs are pushing up the amounts U.S. states must spend on the Medicaid insurance program for the poor, sending some scrambling to find funds, according to a report released on Tuesday by the National Conference of State Legislatures.

The report found that spending on Medicaid and other public healthcare programs is currently over budget in 10 states, compared to six states at the same point last year. In contrast, only five states report that education, which has traditionally taken up most spending, is over budget.

Medicaid is operated by the 50 states with partial reimbursements from the federal government and it can take up to a third of a state’s budget. In fiscal 2012, it consumed 24 percent of total state spending.

When the 2007-09 recession struck, the newly jobless and homeless turned to the program for healthcare, with annual enrollment growth peaking at 7.8 percent. The demand has slowed but not abated - the National Governors Association and National Association of State Budget Officers recently reported enrollment likely grew 3.2 percent in fiscal 2012, which ended in June for most states, from the year before.

In Texas alone the program is underfunded by $4.3 billion for the 2012-2013 biennium, according to the NCSL. West Virginia, meanwhile, must find $180 million more for it in fiscal 2013. Iowa faces an estimated $61 million Medicaid shortfall it will address in its upcoming legislative session and Georgia has a deficit, as well.

The Conference, which represents members of statehouses from across the country, found that Maine’s Medicaid spending continues to increase despite declining caseloads. The shortfall caught Maine by surprise: the state had projected spending on the program to drop, but costs have shot up.

Nevada says a larger number of caseloads than expected accompanied by rising costs drove up its Medicaid expenditures, creating a shortfall. In nearby California, the Medicaid overspending includes its Children’s Health Insurance Program.

Maryland does not list Medicaid as an overrun, but it does say that it is short $9 million for community health and mental hygiene payments. Neighboring Virginia must put more funds toward Medicaid and toward employee health insurance.

Connecticut will also have a shortfall.

A growing number of states are concerned that increased Medicaid demand will pull funds from other areas, especially because all states except Vermont must end their fiscal years with balanced budgets.

Last week’s report from the National Governors Association and National Association of State Budget Officers found that 32 states increased spending on Medicaid in their fiscal 2013 budgets. Excluding Texas, total state spending on the program will likely rise $4.1 billion from last year.

Outside of growing costs, there are two other factors why states are expanding spending: less federal funding and changing eligibility.

The 2009 federal economic stimulus plan included roughly $100 billion in extra funds for Medicaid. That money has run out, and states are having to cover a larger share of the costs.

The NGA and NASBO found that in fiscal 2011 state funds for Medicaid increased by 20.3 percent and federal funds rose 4.1 percent from the year before. The next year, state funding continued to grow by 16.2 percent, but federal money for the program fell 7.8 percent.

The Affordable Care Act, also known as Obamacare, expanded eligibility for Medicaid and provided for 100 percent reimbursement for all new enrollees for a few years. That proportion tapers off to 90 percent in 2020.

The Supreme Court, though, has decided states can opt out of the expansion.

Virginia and other states with Republican leadership have said they will not participate. Many cite the costs of overseeing the bulked up program and the uncertainty in federal guidance. Others intend to participate in Obamacare, which also relies on the states to create health insurance exchanges, as little as possible.

On the other side, some states have already covered people whose incomes are just above the threshold to qualify for Medicaid. The additional funds from Obamacare will help them pay for their already-expanded programs. Some states say they will save money from the expansion, expecting the amounts they must spend on uncompensated care for the uninsured to drop.

Regardless, most states are not primed to cover any new surge in spending demands that could spring from a fresh economic downturn.

The NCSL found states’ revenues are only slowly growing after collapsing in the 2007-09 recession. Two-thirds of states and the District of Columbia told NCSL their revenues are stable and likely to meet projections used in drafting their budgets. Many are hunkering down and keeping spending low in case their revenues again plummet in the face of federal deficit cutting, international debt crises, or a new recession.

“Three and a half years following the official end of the recession, state officials face the prospect that slow and steady growth may be the ‘new normal,'” NCSL said. “With the unpredictability of recent fiscal years, stable is not necessarily a bad position for states but enough uncertainty lingers on the horizon to create a fragile situation for state budgets.”

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