New Medicaid Rules Called Further Threat to Budgets

By Lonnie Harp — November 21, 1990 4 min read

The federal budget compromise approved in the final hours of the 101st Congress will further burden already-strapped state treasuries by imposing new Medicaid mandates that will cost states an estimated $3 billion over the next five years, fiscal analysts warn.

In light of sluggish revenue collections in many states and increased concerns of voter backlash over tax hikes, this year’s Medicaid increases threaten to take a larger slice of state spending at the expense of education and other social programs.

“It’s going to be a problem for the states because many of them are experiencing decreased revenues and having to cut budgets as it is without the new mandates,” said Mary Dingrando, senior staff associate for the National Association of State Budget Officers.

The contrast between rising Medicaid costs and stagnant tax revenue will force tough decisions in many states, added Ron Snell, fiscal program director for the National Conference of State Legislatures.

“You can’t avoid spending more on Medicaid, and you can’t avoid spending more on education,” he said. “It’s impossible to cut that, but you can reduce the increase. Medicaid funding will bite into other areas.”

Despite such fiscal concerns, supporters of the latest Medicaid expansion argue that it will greatly improve health-care services for millions of poor youths.

The new Medicaid demands mark the fourth-straight year that federal lawmakers have decided to increase the requirements they impose on states under the health-care program for the poor.

On average, the federal government pays about half of the cost of Medicaid, while the states pick up the rest.

Even without the added fiscal 1991 costs, states faced an additional $2.5 billion in Medicaid mandates from earlier years, according to the National Governors’ Association.

In addition to a long list of tax increases and cost-saving changes in other programs aimed at reducing the federal deficit by $492 billion over five years, the budget accord finally reached last month between President Bush and members of the Congress also contained several provisions to increase the scope and cost of the Medicaid program.

The most expensive requirement, accounting for more than half of the overall price increase for states, would require coverage of all children ages 6 to 19 whose family income falls below the federal poverty line, the nga said.

Last year, Congress mandated Medicaid coverage for children younger than age 6 with family in8comes below 133 percent of the poverty line.

While this year’s plan would be phased in, the nga estimates its cost to the states at $1.6 billion over five years.

Additional Medicaid services that will be required of states include:

Payment of all premiums, deductibles and co-payments for qualified Medicare recipients who also qualify for Medicaid benefits, at an estimated cost of $700 million over five years;

Expanded home- and community-care for frail elderly beneficiaries, and expanded services for mentally retarded and disabled recipients, estimated at $680 million over five years; and

Continuous coverage of all eligible infants and pregnant women, estimated at $100 million over five years.

In a joint statement issued after the budget plan’s passage, Gov. Booth Gardner of Washington, the nga chairman, and Gov. John Ashcroft of Missouri, the association’s vice chairman, complained that the new health-care mandates, combined with tax increases on gasoline, alcohol, and cigarettes, which are frequently targeted by state taxes, leave many states with few options for dealing with their fiscal woes.

The Governors criticized the Medicaid expansion as a Congressional attempt “to pass on national health insurance to the states through incremental Medicaid mandates.”

Mr. Snell of the ncsl said governors and lawmakers alike fear that Medicaid increases will soon become a more obvious intruder in stateel15lbudgets, since the poor economy will not allow the kinds of budget remedies that masked health-care inflation during the 1980’s.

The amounts of money Medicaid increases will involve “are not gigantic numbers,” Mr. Snell said, “but one thing we know for sure about Medicaid is that states always underestimate” its cost.

In the current fiscal year, states project Medicaid expenditures to rise by more than 13 percent, while state revenue is projected to grow at about 6 percent, according to an ncsl survey.

“The problem with Medicaid is that it’s growing faster than state budgets in general, and it takes the growth money that comes in,” he added.

Even without added requirements, the nga said, many states are fighting losing battles in an effort to gain control of health-care costs.

The growth of Medicaid programs alone will probably cost states an extra $6 billion in fiscal 1991, and increases will amount to $33 billion over five years, according to nga estimates.

While advocates emphasize the long-term benefits to be obtained from improving health care for low-income children, Mr. Snell said the promise is hard to swallow in the face of a souring economy.

“The bad news is coming in from all across the country,” he said, pointing to massive budget shortfalls expected in such states as California, Florida, Michigan, and Pennsylvania.

“There just aren’t any bright spots among the bigger states,” Mr. Snell said.