Stateline Story

Medicaid Budget Woes Get Worse

  • October 29, 2001
  • By Mary Guiden

State officials have been singing the blues about Medicaid budgets since the start of the year. The Sept. 11 attacks have only worsened a bad situation, says a new 20-state survey from the Kaiser Commission on Medicaid and the Uninsured, a nonprofit health policy group backed by the Henry J. Kaiser Family Foundation.

Even before Sept. 11, the economy was spiraling downward. Since the terrorist attacks, states' fiscal conditions have rapidly deteriorated, leaving officials little choice but to make budget cuts. Arkansas may have to chop the state budget by up to $130 million, and Georgia says last month's tax revenues were $74 million lower than they were in September 2000. In Indiana, tax collection estimates for the first quarter of fiscal year 2002 are already $140 million behind what was projected.

What does that mean for Medicaid programs, which cover health care for the disabled, poor kids and other needy people? In more than half the states surveyed by the Kaiser Commission, Medicaid officials have been directed by their governors to plan for spending cuts that go beyond what legislatures have already okayed.

Georgia will cut $33 million in state money out of Medicaid this year and $66 million next year. Iowa officials say the projected cut is more than $18 million, and in North Carolina reductions now total $44.4 million in general funds (including $21 million for prescription drugs). Officials there say some planned expansionsdental services and breast and cervical cancer treatmentwill still go through, making the overall cut around $28 million.

Researchers say during bad economic times, Medicaid programs get caught in the crossfire between a need for increased health services and the erosion of state revenues. "It's a double-edge sword," says Diane Rowland, the commission's executive director. "A recession causes more individuals to lose jobs and health insurance coverage and become poorer, which means Medicaid rolls expand. It (happens) at the same time state revenues go down. So just as the budget has to expand, resources in terms of revenues become harder to get."

Rowland says state officials weighing cutbacks should proceed with caution. "For many states, a $1 cut in Medicaid loses 70 cents in federal money. Because it's a matching program, the more states put in, the more federal money states can get and that may help bring a state out of a recession," she says.

Instead of making overall service cuts, Rowland says policymakers can revisit prescription drug coverage or how much they are paying doctors who provide Medicaid patients with health care. Whatever the decision, Rowland sees a very different climate in Medicaid programs these days.

"A year ago we were talking about program expansions, but we're now talking about ways to maintain what we have. Health coverage is as important today as it was a year ago. We have to try and figure out how to put resources to their best use and try and not add another 10 million uninsured to our population."