NCPA - National Center for Policy Analysis

Rising Medicaid Costs, Falling State Revenues

November 14, 2001

During the booming 1990s, many states added benefits to their Medicaid programs to care for low-income families. Now, because of the wobbly economy, tax revenues are down and states are considering rationing of medical care in attempts to balance their budgets.

  • State health-care costs are growing at their fastest rate in a decade -- nine percent a year.
  • At the same time, states are struggling with budget shortfalls totaling an estimated $15 billion.
  • The Urban Institute warns that if the nation's unemployment rate rises to, say, 6.5 percent -- only about a point above what it is now -- states may have to absorb nearly two million more people into Medicaid.
  • Some states are beginning to reduce benefits -- for example, Oregon recently proposed reducing benefits for 90,000 low-income people by adding cost-sharing co-payments in order to extend coverage to 40,000 others, and Utah wants to cut benefits by about 3 percent.

Under current Medicaid rules, states can add or cut optional benefits, such as prescription drugs, and populations, such as poor adults without children. But they must offer the same benefits to all in the program. So, they can't, for example, cut prescription-drug benefits for poor adults without children, while offering them to families.

States are seeking greater flexibility to make trade-offs in benefits and coverage.

Source: Robert Gavin, "States Look to Ration Health Care," Wall Street Journal, November 14, 2001.

For WSJ text


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