NASBO’s
Spring 2016 Fiscal Survey of States released last month finds that most state budgets continue a moderate pace of growth after several years of slow recovery following the Great Recession. For the first time, estimated state general fund spending and revenues in fiscal 2016 surpassed their fiscal 2008 pre-recession peak levels after adjusting for inflation. The report includes a feature on Medicaid found in Chapter Four. Medicaid is a significant part of state budgets and is estimated to account for about 27.4 percent of total state spending from all fund sources in fiscal 2015, the single largest portion of total state expenditures, and 19.3 percent of general fund expenditures, the second largest after elementary and secondary expenditures according to NASBO’s latest
State Expenditure Report.
The report finds that total Medicaid spending is estimated to grow by 9.0 percent with state funds increasing by 8.3 percent and federal funds increasing by 9.8 percent in fiscal 2016. Governors’ recommended budgets for fiscal 2017 assume an increase in Medicaid spending of 2.1 percent in total funds with state funds increasing by 3.0 percent and federal funds increasing by 2.0 percent. While Medicaid spending in governors’ proposed fiscal 2017 budgets slows from the previous year, the growth in state funds (general and other state funds) of 3.0 percent exceeds the general fund increase of 2.5 percent in governors’ proposed fiscal 2017 budgets.
States reported an increase of Medicaid enrollment of 14.6 percent during fiscal 2015 and an estimated increase of 4.4 percent in fiscal 2016. In governors’ recommended budgets for fiscal 2017, Medicaid enrollment would rise by an additional 2.8 percent. This reflects both the impact from the Affordable Care Act (ACA) including increased enrollment in states that have implemented the Medicaid expansion that began in January 1, 2014 as well as increased participation among those currently eligible in both states that did and did not implement the expansion. Medicaid enrollment is estimated to grow by about 23.0 percent over the three-year period from the beginning of fiscal 2015 through fiscal 2017.
States were asked to identify issues and trends that are affecting their Medicaid spending. The most frequent responses were around concerns in pharmaceutical costs for both specialty drugs as well as for generics. Many states cited overall enrollment trends as a concern from both expansion under the ACA and also overall enrollment trends including for elderly and disabled individuals. Other concerns states mentioned included long-term care costs and higher costs for the state share for the dually eligible population (those individuals who are covered by both Medicare and Medicaid). Federal policy changes, including federal rules on Medicaid managed care and home health care, were also cited as budgetary concerns.
States that expanded Medicaid under the ACA were asked about how they will finance the 5 percent match that will be required for the expansion population beginning January 1, 2017. States plan on using a combination of revenue sources including state general funds, premium taxes, cigarette taxes, intergovernmental transfers, and provider assessments to provide the state match. Other states plan to redirect funds from other services to fund the required match.
States that have chosen to expand Medicaid under the ACA were asked about the impact on other state funded programs. Of the states that expanded, about one half of the states noted that they are seeing savings for behavioral health programs, corrections programs, and in uncompensated care expenses. Other states have not seen savings at this point in time or the figures remain uncertain. Some states also mentioned savings from previous waiver programs and from health screenings that are now being covered by the Medicaid expansion, from reduced expenditures from state funded general assistance programs, and additional revenues such as from premium taxes.