Confronting costs: medicaid spending is at the top of many legislative agendas.

• Author: Hansen, Melissa
• Position: HEALTH

Even in this era of partisan deadlock over many issues, there is one thing almost all legislators can agree on: Medicaid is overwhelming state budgets.

The state's share of the joint state-federal program accounts for an average of 15 percent of state general funds and about 21 percent of total state spending when federal funds are added to the mix. In 2009, the states' share of the Medicaid tab reached $123 billion, a hefty expenditure, given that states faced $117.6 billion in budget gaps that year.

The fiscal situation is brighter now, but budgets remain under pressure, and Medicaid costs continue to grow.

"We need to be looking at Medicaid," says Oklahoma Representative Mark McCullough (R). "We've added more than 204,000 people to our Medicaid program over the past five years and have more than doubled our state share of Medicaid expenditures in the last 10 years. This current trajectory is totally unsustainable. Our costs on a chart are at a 45 degree angle."

[ILLUSTRATION OMITTED]

Ten states--California, Colorado, Louisiana, Maine, Maryland, North Carolina, Pennsylvania, Tennessee, Washington Oklahoma and West Virginia--were forced to make mid-year revisions to close 2012 Medicaid budget gaps. The states' fiscal situation, coupled with the opportunities and challenges in federal health reform, have pushed Medicaid cost containment to the top of many legislative agendas.

Oklahoma is opposed to the federal health reform law, says McCullough, "but the best thing it did was to get everyone talking about health care and Medicaid."

No More Low-Hanging Fruit

Cutting benefits, limiting eligibility and reducing provider reimbursements have been the three "usual suspects" used by states for short-term Medicaid cost containment. Federal health reform requires states to maintain their March 2010 Medicaid eligibility levels, however, eliminating a key tool from the legislative arsenal. At least 46 states made a benefit or provider reimbursement change in 2012 to reduce program costs.

The 2014 expansion of Medicaid required by the The Patient Protection and Affordable Care Act makes everyone with an income at or below 133 percent of the poverty level--$23,050 for a family of four in 2012--eligible for the program. That expansion could be derailed by a challenge to the federal reform law now being considered by the U.S. Supreme Court. A ruling is expected later this month.

If the expansion is upheld, it will add more than 16 million people to the Medicaid rolls, increasing the total cost of the program by about 8 percent over projections of Medicaid spending without the impact of federal health reform. Almost all of this increase is projected to be paid by the federal government ($434 billion, or about 95 percent). Nevertheless, states will continue to face the dual challenges of carrying out...