Medicaid and State Budgets: A Look at the Facts – Say Ahhh! A Children’s Health Policy Blog

There has been much discussion about states’ ability (and
willingness) to help finance health reform, especially as it concerns an
expansion of Medicaid. A little background data may help to illuminate the debate.

While significant, Medicaid’s role in state budgets is
far more modest than the headlines often suggest. Medicaid constitutes 16.2% of
state general fund spending, leaving it well behind elementary and secondary
education (in fact, as shown below, states spend nearly twice as much of their
own money on elementary and secondary education (35.1%) as on Medicaid).

It is often, misleadingly, suggested that Medicaid
consumes a larger share of state budgets than any other item. Misleadingly
because the numbers cited to make this point include federal Medicaid matching
funds states receive. So while this may be true for total state spending (if
you include federal funds), it is not the case if you consider Medicaid
spending as a share of a state’s own general fund (basically just the state’s
money). In fiscal year 2009, state funds spent on Medicaid actually decreased
by 2.2% from fiscal year 2008 due to the increased federal Medicaid support
made available by ARRA – the federal stimulus legislation.

As the health reform debate continues, it is important to
acknowledge state concerns regarding their dismal fiscal conditions and realize
that there are certainly options to adjust the formula in order to make it more
equitable across states.

However, it is also vital not to lose sight of the larger
point – states are getting a pretty good deal out of health reform: near
universal coverage with marginal costs. Yes, their budgets are in disarray and
yes the federal government (not to mention their citizens) are expecting a bit
more of them. But these requirements are years away, as states would not be
expected to contribute to the cost of the newly eligible until 2015 in the
House bill and 2017 in the Senate bill.

There’s a risk of exaggerating claims without a full
understanding of the fiscal implications of health reform (or current Medicaid
spending). Everybody would be better served by having an honest debate about
the true costs of reform and how best they can be shared.

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