Weekly Wrap: Rising Medicaid Bill a Growing Concern for States

By: - August 28, 2009 12:00 am

New Mexico may foreshadow a Medicaid crisis facing states next year as the federal economic stimulus money dwindles.

Look on page 7 of a recent PowerPoint presentation by New Mexico Human Services Secretary Pam Hyde to state lawmakers. She said the state’s Medicaid program could be facing a shortfall of up to million by 2011 unless costs are contained. The stimulus money will be gone by then, she stressed in an interview with The New Mexico Independent .

The Medicaid problem is on top of New Mexico’s ongoing fiscal pressures. Less than two months into the new fiscal year, the state has a separate million budget gap due to tax revenue that has plunged deeper than projected. That has prompted Gov. Bill Richardson (D) and legislative leaders to plan a special session in October.

One in four New Mexico residents gets some form of state-financed health care. A million Medicaid gap would ensure cuts “much more drastic than we’ve had to do in the past,” Hyde said. Like many states, New Mexico used its stimulus money this year to help close a shortfall.

Other states may have the same Medicaid challenge.

A new report shows that, in July, 69 additional people each day qualified for the Medicaid program in Nebraska, a one-month record. In Rhode Island, a new analysis says nearly half of the state budget goes to safety-net programs, and Medicaid spending accounted for almost 90 percent of the increase in social service spending between 1992 and 2006. West Virginia’s budget director predicted that the department that oversees Medicaid will soon consume a fourth of the state budget, according to the Charleston Daily Mail , and the state’s Medicaid trust fund is expected to run dry by 2013.

California Gov. Arnold Schwarzenegger (R) has started a Website for Twitter users to offer suggestions on how to turn around the struggling state. “Yes, you can fix CA in 140 characters!” one tweet said.

The site expands the governor’s June 2009 Twitter request to submit ideas about fixing the state budget. Schwarzenegger also toured Twitter headquarters and participated in a webcast.

It remains to be seen how helpful the site will be, judging from some of the initial responses: “Legalize marijuana … and tax it like alcohol.” “Reduce the major expense areas: Health and Human Services, Corrections, Education …” “Please VETO Harvey Milk Day.” Then again, there were some thoughtful responses: “Stop spending money you don’t have.”

Nearly two months into the current fiscal year, three states – Arizona, Connecticut and Pennsylvania – still do not have final budget agreements.

At least on the surface, Arizona appears closest to a deal. The Legislature has sent a budget to Gov. Jan Brewer (R), who is weighing whether to sign or veto it before a Sept. 5 deadline. But it’s the same budget she rejected seven weeks ago, the Arizona Daily Star notes, and negotiations are continuing, as Brewer pushes legislators for a ballot measure that could temporarily raise the state sales tax.

There were signs of progress in Connecticut this week. Gov. M. Jodi Rell (R) offered a revised budget plan that would hike income taxes on the wealthy, prompting leaders in the Democratic-controlled General Assembly to say, “We’re very encouraged by the governor’s proposal,” according to the Hartford Courant . The budget could come up for a vote next week.

Pennsylvania is another story. As the Pittsburgh Tribune-Review put it, “Democratic Gov. Ed Rendell and Senate Republicans can’t agree on what they’ve agreed to,” with Rendell seeing progress in the budget talks where the GOP saw none. Republicans insist the state must make deeper cuts to balance the books, while Rendell and other Democrats have demanded new revenue sources.

Stateline.org staff writer John Gramlich contributed to this report.

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Stephen Fehr

Stephen Fehr is a senior officer with Pew’s government performance portfolio. He is a lead writer on many of the products generated by the portfolio, specializing in state and local fiscal health.