The Medicaid spending morass: Medicaid continues to grow at alarming rates causing states to seek solutions.

• Author: Perez, Arturo
• Position: Federal Medical Assistance Percentage

Medicaid costs will strain state budgets considerably in the coming year. The top fiscal issue for the 200S sessions is rising costs for health care and Medicaid, say legislative fiscal officers. Sixteen states expect overruns in Medicaid early this fiscal year.

Already slated to grow 12.7 percent this fiscal year, Medicaid spending is likely to rise even further due in part to a reduction in the federal Medicaid share, rising prescription drug costs, increased costs for long-term care and expanding caseloads.

This is nothing new. Idaho's Medicaid growth rate, for example, has averaged 15 percent over the past 20 years.

"We face the same factors as other states, including rising caseloads, medical inflation and the inclusion of optional services," says Jeff Youtz, budget supervisor for the Idaho Legislative Services Office. He says Medicaid's growth means other programs suffer, and higher education, in particular, loses a large share. Idaho appointed an interim committee in 2004 to examine the Medicaid budget and present recommendations to the Legislature. The committee was asked to analyze caseloads and recommend cost containment measures.

FASTEST RATE OF GROWTH

Medicaid accounts for 17.6 percent of total general fund appropriations in FY 2005. That's up from 16.3 percent in FY 2004, and 12 percent a decade ago. As in Idaho, Medicaid increases have come at the expense of other general fund programs, particularly higher education. Only K-12 education, with its 34.1 percent share of total appropriations, accounts for more general fund spending than Medicaid.

But at 12.8 percent, Medicaid has the fastest rate of growth reported for any of the major program categories in state budgets. By comparison, overall general fund appropriations are slated to increase 4.8 percent in FY 200S. K-12 education will grow 6.3 percent, higher education 3 percent, and adult corrections 4.9 percent for FY 2005.

"The legislature is always looking for additional resources for Medicaid," says Les Boles, director of the South Carolina Office of State Budget. Similar responses resonate from other state officials as they attempt to grapple with the delicate balance of continuing to provide health care services for the state's poorest residents while attempting to address priorities in other areas of the budget.

CONTROLLING COSTS

Concerned with the rising cost of Medicaid, policymakers have attempted to craft cost containment measures that can result in real savings...