NCPA - National Center for Policy Analysis

MEDICAID CUT PLACES STATES IN BUDGET BIND

June 9, 2010

Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid, says the New York Times. 

Governors and state lawmakers, already facing some of the toughest budgets since the Great Depression, said the repercussions would extend far beyond health care, forcing them to make deep cuts to education, social services and public safety. 

  • Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state's ledger, reducing its projected shortfall to $1.2 billion.
  • The only way to compensate for the loss, he said in an interview, would be to lay off at least 20,000 government workers, including teachers and police officers, at a time when the state is starting to add jobs.  

"It would actually kill everything the stimulus has done," said Rendell, a Democrat. "It would be enormously destructive." 

  • The Medicaid provision, which would extend assistance first granted in last year's stimulus package, was considered such a sure bet by many governors and legislative leaders that they prematurely included the money in their budgeting.
  • But under pressure from conservative Democrats to rein in deficit spending, House leaders in late May eliminated $24 billion in aid to states from a tax and jobs bill that was approved and forwarded to the Senate.  

The Senate plans to take up the measure this week, and the majority leader, Senator Harry Reid of Nevada, favors restoring the money, said his spokesman, Jim Manley.  The House speaker, Nancy Pelosi, signaled last week that her chamber was open to reconsidering the appropriation. 

But state and Congressional officials said the evolving politics of a midterm election year meant that the federal aid could no longer be taken for granted.  And if it does not arrive, it will leave gaping shortages for states that are already slashing services and raising taxes to balance their recession-racked budgets. 

According to the National Conference of State Legislatures, states are relying on the money to close more than a fourth of the $89 billion in cumulative budget shortfalls projected for the 2011 fiscal year, which starts on July 1 in 46 states. 

Source: Kevin Sack, "Medicaid Cut Places States in Budget Bind," New York Times, June 8, 2010. 

For text:

http://www.nytimes.com/2010/06/08/us/08medicaid.html  

 

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