Most state Medicaid programs are expected to face budget shortfalls next
year as the nation's economy stalls and demand for public health care
assistance continues to rise, according to an annual survey of state program
The 50-state survey of the directors was conducted by the Kaiser Family
Foundation's Kaiser Commission on Medicaid and the Uninsured (KCMU) and
released in late September.
"We're just beginning to see the impact of the economic slowdown, as
growing Medicaid enrollment and shrinking revenues pose new threats for health
coverage," said Diane Rowland, KCMU executive director.
Medicaid is a jointly funded state and federal program that pays for health
coverage and long-term-care support to more than 44 million people in
low-income families and nearly 14 million elderly and disabled individuals.
Medicaid pays for more than half of all publicly financed mental health
services in the United States and accounts for 26 percent of the country's
total mental health spending, according to KCMU. About 13 percent of all
Medicaid beneficiaries receive mental health care through the program.
The survey found that Medicaid enrollment nationwide grew 2.1 percent in
Fiscal 2008, while states increased Medicaid spending by 5.3 percent. That
jump in spending was significantly higher than spending in each of the
previous two years.
Respondents estimated that Medicaid enrollment will jump 3.5 percent and
that state spending will increase 5.8 percent in 2009. In Fiscal 2006, the
latest year for which nationwide numbers are available, states spent a total of
$100.6 billion on their Medicaid programs.
The increased use of Medicaid services and rising cost to the states come
as the nation confronts an economic downturn, and states face tightening
budgets. Thirty states already have confronted significant budget shortfalls
as they prepared their Fiscal 2009 budgets.
Two-thirds of Medicaid programs are likely to face a budget shortfall,
according to the directors. Midyear shortfalls could force abrupt changes to
control costs, potentially including cuts in eligibility and outreach
Medicaid directors attributed growth in enrollment to the deteriorating
economies in their states, according to the survey. Some of the enrollment
increases may be related to rising unemployment, loss of employer-based
coverage, and declining incomes, making more individuals potentially Medicaid
eligible. Ongoing state efforts to address the uninsured such as expanding
Medicaid eligibility, improving outreach, and simplifying enrollment
procedures also played a role in the growth.
But the eighth annual KCMU survey also identified some good news for state
Medicaid programs, including the finding that more states made restorations,
enhancements, or expansions to their Medicaid programs than made cuts in both
Fiscal 2008 and Fiscal 2009. The improvements included increased provider
reimbursements and in-home and community-based services for long-term
Nearly one-third of states expanded their managed care programs in Fiscal
2008. The most significant trends involved including people with disabilities
in managed care, expanding managed care service areas, and requiring
enrollment into managed care when it had previously been voluntary. States
continue to focus on quality efforts such as pay-for-performance and
implementation of new information technology initiatives.
A troubling finding for mental health advocates was the response of nearly
all state Medicaid directors that "moderate or significant"
problems were arising from the growing cost of mental health care, psychiatric
medications, psychiatric hospital emergency room use, and inpatient
psychiatric treatment. Increased utilization of mental health services,
specifically, was reported as one of the leading drivers of increased Medicaid
spending in Fiscal 2008.
States may get temporary federal assistance to avoid a Medicaid funding
crunch during the current economic downturn.
House Democrats plan to decide during a postelection lame-duck session the
extent and cost of a second economic stimulus package, which is likely to
include a temporary funding boost for state Medicaid programs.
Democrats have pushed for a second economic stimulus or recovery bill for
months. The House passed a $60.8 billion package in September (HR 7110) that
included Medicaid funding boosts. President George Bush threatened to veto the
bill, and Senate Republicans objected to approving a similar measure (S
The Center for Budget and Policy Priorities (CBPP), a liberal think tank,
recently called for state Medicaid program assistance similar to the $20
billion the federal government provided to states during the last recession in
the form of increased Medicaid matching funds and general grants to
"The package averted even deeper cuts in public health insurance than
actually occurred and helped prevent cuts in a wide variety of other critical
services," wrote Nicholas Johnson, director of the CBPP's State Fiscal
Project, and colleagues in a September report.
The CBPP report detailed the increasing Medicaid cuts that states have made
in recent months and concluded that an even larger federal Medicaid funding
package may be needed than the one enacted in 2003 because the looming
recession appears worse than the last downturn.
The KCMU report, "Headed for a Crunch: An Update on Medicaid
Spending, Coverage, and Policy Heading Into an Economic Downturn—Results
From a 50-State Medicaid Budget Survey for State Fiscal Years 2008 and
2009," is posted at<www.kff.org/medicaid/7815.cfm>.▪