Today the National Governor’s Association (NGA) and the National Association of State Budget Officers (NASBO) released their annual report on state budgets. In short, state budget problems are improving as revenues increase and spending reductions are made. To be sure, the states should continue to reduce the size of state governments to cope with deficits, but, according to the report, the problems facing state budgets have lessened since 2008. In future projections of state budgets the NGA and NASBO confirm that Medicaid will remain an issue for state budgets.
The report states that total state Medicaid spending increased by 16 percent between 2010 and 2011. It confirms that the dominant issue for state Medicaid policy is cost containment. In fact, based on a Kaiser annual survey on Medicaid cited by the report, 46 states plan to restrict provider rates in 2012. On top of these reductions states are pursuing enhance managed care and care coordination policies.
Cost containment will continue to be a focus as the report confirms the new health care law will pose significant new costs to states through Medicaid. These costs will include increased enrollment of individuals not covered by new federal funding, new administration costs for much larger enrollment numbers, the simple administrative costs associated with the aggressive timeline in the health care law, and rising health care costs.
The Foundation has written extensively on the rising costs and unsustainability of Medicaid. This report confirms that Medicaid, in its current form, cannot continue for states without significant reductions to other programs, such as public education, or significant tax increases. These will be the options for Texas in the next legislative session. It is hard to imagine that Texas taxpayers will approve of new taxes or significant cuts to education in order to finance a program that provides relatively poor quality of care.
– Spencer Harris