State budgets having problems due to economic downturn
The latest Fiscal Survey of States by the National Association of State Budget Officers (NASBO) says FY 2008 "marked a turning point for state finances with a significant increase in states seeing fiscal difficulties, in stark contrast to the preceding several years."
A weaker economy and declining state revenues and spending are combining to give states new fears of economic problems, NASBO says.
NASBO says while three states had to reduce their enacted budgets in FY 2007, 13 states were forced to reduce enacted budgets in FY 2008, a "stark contrast." It also reports that 18 states are assuming negative budget growth for FY 2009 governors' recommended general fund budgets, while four states are estimating negative growth budgets for FY 2008.
On the spending side, Medicaid remains a major issue, with spending from state funds estimated to increase by 4.4% in recommended FY 2009 budgets, more than four times the growth rate for the overall general fund. "This increase in health care spending continues to place pressure on state budgets by exceeding overall spending," the report says.
But even with the weakening of many state fiscal conditions during FY 2008, nearly half of the states have proposals to increase coverage to the uninsured in their governors' proposed FY 2009 budgets. In many cases, NASBO says, the proposals seek to provide additional coverage on an incremental basis due to the cost of providing universal coverage.
While Medicaid spending rates have moderated from historic levels, the budget officers say, the growth rates still exceed overall general fund spending increases.
Medicaid spending is estimated to increase by 3.7% in governors' recommended budgets for FY 2009, with state funds increasing by 4.4% and federal funds increasing by 3.3%. Within the average growth figures, there is considerable variance among states in growth rates, with some states proposing to spend less in 2009 than in the previous year.
Significant Medicaid increases
In FY 2008, total Medicaid spending is estimated to increase by 6.4%, with state funds increasing by 6.3% and federal funds by 6.7%. Since Medicaid makes up such a large portion of state budgets, the report says, the growth rates relative to overall budget increases have a significant impact on allocation of state spending.
The budget officers see states facing a number of challenges in funding and providing health care, both within the Medicaid program and throughout state government. They say issues of greatest concern include expanding access to health care for the uninsured, health care cost increases and greater utilization of services, the aging population and the impact on long-term care financing, federal regulatory actions limiting federal participation for key services, work force shortages, pressure to raise physician rates to maintain participation in Medicaid, SCHIP funding, mental health funding and access, and generally the pressure to maintain health care spending that on average consumes a greater share of state budgets over time.
The report references the most recent Congressional Budget Office estimates, which suggested that even with more moderating growth rates in health care spending from the recession's height, projections over the next decade remain at an average annual rate of some 8% from FY 2008 through FY 2018. "With Medicaid comprising 22% of total state spending, these long-term growth rates will continue to strain state budgets," NASBO says.
The report says governors' health care reform proposals vary widely from those that try to cover all of the state's uninsured to those targeting expansions for specific groups such as uninsured children or employees of small businesses. In many cases, it says, the proposals seek to provide additional coverage on an incremental basis due to the costs of providing universal coverage.
Six states reported a goal of covering all their residents, although resource commitments, strategies, and timelines vary significantly. The majority of state proposals include specific target groups that include childless adults, low-wage workers, parents, small-business employees, and children.
Methods that states plan to use for health care expansion include Medicaid, SCHIP, Medicaid waivers, state programs, flexibilities under the Deficit Reduction Act, public-private partnerships, and a combination of other approaches. The most frequent methods rely on both traditional Medicaid and Medicaid waivers. In many cases, states plan to use a combination of funding sources that may also include employer and individual contributions, tobacco funds, and provider taxes and fees.
The most frequent expansion features include premium subsidies, cost control measures, quality improvement, personal responsibility requirements, and a state-administered health plan. Other features include individual or employer mandates, consumer-directed plans, tax credits, and changes to insurance regulations.
Some 20% of states plan to conduct outreach and streamline eligibility in Medicaid and SCHIP to attempt to increase participation in those programs.
NASBO says proposals to cover the uninsured are affected by the deteriorating revenue outlook in many states and by a lack of additional funding under SCHIP program extensions. Proposals to expand state-level coverage are continuing despite the declining fiscal condition in many states, the report says. While many proposals may not be enacted this year, or may be scaled down considerably, it is clear that covering the uninsured is a high priority for many state governments, and many of the proposals have come from governors from both parties. In many cases, changes to expand health care take more than one budget cycle to achieve, and proposals to address the uninsured will be expected to surface over the years to come.
Download the Fiscal Survey of States at www.nasbo.org/Publications/PDFs/Fiscal%20Survey%20of%20the%20States%20June%202008.pdf.
The latest Fiscal Survey of States by the National Association of State Budget Officers (NASBO) says FY 2008 "marked a turning point for state finances with a significant increase in states seeing fiscal difficulties, in stark contrast to the preceding several years."You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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