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States Cut Health Spending

Ruzanna Harutyunyan's picture

States faced with declining revenue are cutting overall spending for the first time since 1983 and Medicaid funding could face serious shortfalls in some states if the federal government does not provide relief, according to a survey released Monday by the National Association of State Budget Officers and the National Governors Association, CQ HealthBeat reports (Weyl, CQ HealthBeat, 12/15). According to the report, states have cut general fund spending by $380 million to $689 billion in the current fiscal year, which began in July for 46 states. Medicaid accounts for 17% of state general fund budgets, according to the report (Selway, Bloomberg, 12/15).

The survey, which was conducted in the fall comparing the actual FY 2007 state budgets to preliminary FY 2008 budgets, found that 31 states are projecting budget shortfalls totaling at least $30 billion. Raymond Scheppach, NGA executive director, said more states "will probably announce shortfalls as they go into their legislative sessions in January." The survey found that spending by states in FY 2009 likely will decline by 0.1% -- an "extremely significant" drop, according to NASBO Executive Director Scott Pattison (Sanchez, CongressDaily, 12/15).

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"The downturn in the economy is expected to result in significant increases to Medicaid enrollment as it has in previous recessions," the report found. NGA has recommended an increase in the Federal Medical Assistance Percentage, which determines the amount of federal matching funds for Medicaid programs, of between $66 billion and $100 billion. NGA has asked that the funding be included in the economic stimulus package likely to be signed shortly after President-elect Barack Obama takes office in January 2009 (Bloomberg, 12/15).

Scheppach recommended that the increase be between one-third and one-half of the state budget shortfalls, saying, "The purpose is not to bail out states but to offset the cuts that states are going to make," and, "We do think that FMAP is a good way to do that." Scheppach added that he hoped Congress would act quickly to approve a five-year reauthorization of SCHIP as either part of the stimulus package or on its own bill. Scheppach said, "The worst case for us is to go into several short-run extensions" that do not give states predictability (CQ HealthBeat, 12/15).

House Speaker Nancy Pelosi (D-Calif.) in an interview on Monday said that she expects a two-year economic stimulus plan worth between $500 billion and $600 billion to be approved in the House before Obama's inauguration, USA Today reports (Kiely, USA Today, 12/16).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.