NCPA - National Center for Policy Analysis

Governors See Medicaid Costs As Unsustainable

February 25, 2002

Medicaid costs are an enormous burden on state budgets, eating up all the additional revenues states collected in recent years, governors are complaining. They want the federal government to pick up an increased share of expenditures under the joint federal-state program that provides medical services for 44 million low-income people.

  • Medicaid costs last year increased 11 percent -- and many states reported that spending on prescription drugs covered by Medicaid jumped 20 percent.
  • One-fifth of all children receive benefits under the program and it helps pay for one-third of all births and the care of two-thirds of U.S. nursing home residents.
  • It is, after education, the largest program in state budgets.
  • At the winter meeting of the National Governors Association, participants used such terms as "unsustainable" and "major crisis" to describe the situation confronting them -- and warned they faced the need for major program cuts or substantial tax increases.

Some 7 million elderly and disabled persons are eligible for benefits under both Medicaid and Medicare. Such people with dual eligibility account for 16 percent of Medicaid recipients -- but more than 30 percent of all Medicaid spending.

Among the governors' other proposals: allowing states to charge higher co-payments for drugs and services provided to Medicaid recipients; expanding Medicare coverage of home health care; and increasing the discounts that drug manufacturers must provide to state Medicaid programs.

Source: Robert Pear, "Governors Say Medicaid Needs More Federal Help to Control Rising Costs," New York Times, February 25, 2002.


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