Growth in state spending on the Medicaid program is expected to fall significantly in the short term, according to a new report by state budget officers.
The findings, published Thursday in a report from the National Association of State Budget Officers, or NASBO, show that state Medicaid spending is expected to carry a median growth rate of 4.5 percent in fiscal 2018, and then growth is projected to slow significantly in fiscal 2019, to a median growth rate of 1.5 percent. The organization uses governors’ budgets in making its assessments.
In the long term, however, healthcare costs are expected to grow faster than revenue, which will put additional strain on state budgets. Medicaid is the second-largest expenditure in most states, and in future years, the program is expected to grow closer to historic levels of 5.5 percent, according to the federal government’s Congressional Budget Office.
“The Medicaid program continues to pose long-term spending pressures for states as they monitor the impacts on their budgets of rising prescription drug costs, the growing elderly and disabled population, changes in federal laws and regulations, and costs associated with the opioid epidemic,” NASBO said.
Because of this, states have been looking at ways to lower costs, including encouraging programs that deliver better care to patients, passing laws to cut spending on medicines, and moving their Medicaid programs into managed care, which are handled by private health insurance companies.
At the same time, state budgets for this past year have been mostly stable. In response, some states increased how much they pay medical providers and agreed to cover more benefits.
D.C. and 33 states have moved to expand the Medicaid program under Obamacare, which covers low-income people at no cost to themselves. The law was originally written to have all states expand the program, but some states have opted not to. Previously, most states used Medicaid to pay for medical care for pregnant women and people with disabilities.
[Also read: 54% of alien children, teens, on welfare, nearly half for adults]
Under Obamacare, states began to pay for 5 percent of the expansion cost in 2017, and gradually pick up more over the years. By 2020, states will pay a maximum 10 percent of the share of expansion. The latest report from NASBO shows that spending is expected to increase for states by $3.6 billion in 2018 because of the expansion. Even though the states will pick up a bit more of the share in 2019, spending from state funds overall is expected to decrease.
State fiscal conditions are improving and stabilizing compared to this time last year, NASBO said. States are collecting more revenues in their general fund, which leaves governors with more flexibility on how to spend the funds. For fiscal 2018, most states are either meeting or exceeding revenue projections because of job growth and better stock market performance in states that rely heavily on the energy sector. The climb is occurring after two years in a row in which half of states fell short.
