States Still Recuperating, Outlook is Positive – Say Ahhh! A Children’s Health Policy Blog

The National Association of State Budget Officers just
released their Fall 2011 Fiscal Survey of States.  We have become accustomed to reading
about Medicaid as one of the big-ticket items in state spending.  While some detractors have reasoned
that increased spending is emblematic of a broken program, NASBO gets it
correct by attributing increased enrollment during a weak economy as the
largest driving factor.  Other
contributing factors include a loss of enhanced federal matching funds due to
the expiry of recovery (ARRA) funds, and the overall increase in health care

The good news is that growth in Medicaid enrollment is
decelerating, as state budgets continued to rebound in FY 2011 compared to the
previous two budget years. 
Revenues and state balances were up again and mid-year budget cuts were
reduced significantly.  So far,
things are also looking up for enacted FY 2012 budgets.

In 2012, state general fund revenues are projected to
grow for the third consecutive year, resulting in an increase of $10 billion
(1.5%) over FY 2011.  Although, due
to the large loss of revenues in FY 2009 and 2010, states are still only
expected to collect $21 billion, or 3.1% less than they did in FY 2008.  General fund spending on Medicaid is
expected to grow a little more than $19 billion, an increase that accounts for
just 2.8% of the enacted FY 2012 budgets.

Despite reduced federal matching funds for Medicaid,
states appear to be in decent shape.  Enrollment is estimated to increase by only 4.1% in FY 2012,
a decrease of 3.1 percentage points from its growth in FY 2010.  In addition, the number of states having
to make mid-year budget cuts dropped from 39 states in FY 2010 to 19 states in
FY 2011 (so far this fiscal year, just two states have done so).  Yet, we know that a number of states
have recently tried to control Medicaid costs by cutting benefits, enrolling
beneficiaries in managed care, and reducing provider rates, all of which have
the ability to reduce patients’ access to vital health services. 

Not surprisingly, states still have an uphill battle in
addressing fiscal issues, as the economic recovery remains weak.  But to keep things in perspective, the
share of state general funds allocated to Medicaid is estimated to have
increased just 1.4 percentage points from FY 2008 to FY 2011, despite the
enrollment growth. 

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