By John Reichard, CQ HealthBeat Editor
June 5, 1007 -- Based on the budget recommendations of the nation's governors, Medicaid spending will grow by 5.8 percent in fiscal 2008, down from an expected growth rate of 6.6 percent in fiscal 2007, according to a new survey.
Medicaid spending growth is moderating as states mount more aggressive cost-control efforts, said the survey by the National Governors Association and the National Association of State Budget Officers (NASBO). Over the past five years, every state has adopted cost controls, "with the majority centered on freezing or reducing provider payments and managing prescription drug costs," the survey said.
But Medicaid remains the dominant force in state spending—it accounts for 22 percent of state outlays—and "continues to constrict state budgets as it has for many years," the survey noted. And pressure to increase Medicaid spending is likely to grow as more governors offer proposals to widen coverage of the uninsured.
Thirty-four governors introduced plans to reduce the number of uninsured residents in fiscal 2008, according to the analysis. Proposals rely on expansions of the State Children's Health Insurance Program (SCHIP), traditional Medicaid, and revisions to traditional Medicaid permitted under the budget savings law signed last year by President Bush (PL 109-171).
"Proposed fiscal 2008 funding for these programs totals nearly $18.4 billion," the study said. About half of that would come from state and federal Medicaid and SCHIP funding, it estimated.
Overall, the survey concluded that "fiscal conditions have been strong and stable" in the states. "Only three states were forced to reduce their enacted budgets by an aggregate $170 million in fiscal 2007," it said.
"This report demonstrates that most states are still in good financial shape, but some are expecting their revenue and spending growth to decline somewhat over the next year or two," said NASBO Executive Director Scott D. Pattison. "We expect a handful of states to begin experiencing more difficult fiscal times."
The analysis also noted other projections that show yearly Medicaid spending growth rates creeping back up.
"Even with the more moderate growth rates in health care spending from the height of the most recent fiscal downturn, projections over the next decade remain at an average annual rate of about 8 percent from fiscal 2008 through fiscal 2017, according to the most recent estimates by the Congressional Budget Office."
