Rising Health Care Costs Threaten States' Economic Outlook

Health Care Costs

Mounting fiscal pressures from rising health care costs, among otherfactors, could cause severe budget shortfalls for state governmentsnationwide, according to a report released Wednesday by the National Governors Association and the National Association of State Budget Officers, the AP/Asbury Park Press reports (Welsh-Huggins, AP/Asbury Park Press,12/5). According to the report, Medicaid spending from all fundingsources in fiscal year 2007 is estimated to increase by 7.3%, comparedwith a growth rate in FY 2006 of 1.7%.

A significant factor inthe increase stems from the provision of prescription drug benefits tobeneficiaries who are dually eligible for Medicare and Medicaid. Underthe Medicare prescription drug benefit, dual-eligibles now receivetheir drug benefits through Medicare, and states finance those benefitsthrough payments to the federal Medicare Trust Fund. Those payments areprojected to amount to about 5% of state Medicaid expenditures,according to the report.

The report says that Medicaid coststotal about 22% of states' budgets, while overall health care costsmake up about one-third of spending -- the single largest segment ofstate budgets. According to CQ HealthBeat,other health care challenges for states include access for theuninsured, rising health costs and higher utilization of services. Thereport says that the increase in the population of elderly people,budget cuts for public health programs and reductions in medical staffare adding to pressures on states.

In addition, governors are expressing concern about delays in the reauthorization and expansion of SCHIP, CQ HealthBeatreports. NGA Executive Director Raymond Scheppach said anyreauthorization and expansion of the $5 billion program should includean additional $1.6 billion to help states cover budget shortfalls(Carey, CQ HealthBeat, 12/5).

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