Report: Nearly 17 cents of each state revenue dollar goes to Medicaid, 4.5 cents more than 2000

In fiscal year 2015, Medicaid consumed 16.7 cents of each state-generated dollar – 4.5 cents more per dollar than in fiscal 2000, according to The Pew Charitable Trusts” Fiscal 50: State Trends and Analysis.”

Pew’s recently updated analysis reports that total Medicaid spending, federal and state, rose by $57.2 billion – or 11.7 percent – in 2015.

This was the largest nominal spending increase in 13 years due to nearly 4 million more people enrolling, the report states. From 2000 to 2013, more people enrolled, Pew notes, because of two economic downturns that resulted in unemployment and health insurance coverage losses, and a gradual erosion of employer-sponsored insurance. Because millions more joined after the passage of the Affordable Care Act (ACA), Medicaid was at its highest level since 2000 in 2015 in Alaska, Delaware, Louisiana, Mississippi, Montana, Ohio, Oklahoma, South Dakota, Texas and Wisconsin.

Because of the ACA, states were able to expand Medicaid by relying on more federal funding. The latest 50-state data reflect nearly two years – seven quarters – of the ACA’s Medicaid expansion, which took effect in January 2014. The law expanded Medicaid eligibility as an option to states for individuals under age 65 who earn up to 138 percent of the federal poverty level. As of June 2017, 31 states decided to expand Medicaid eligibility.

The federal government absorbed 100 percent of expansion costs through 2016 for states that chose to extend health coverage. This subsidy will gradually decrease to 90 percent by 2020. In 2015, the federal government covered 61.9 percent of states’ Medicaid bills.

As federal aid decreases, states’ costs increase, but state tax revenue may not. This imbalance resulted in each state spending roughly 17 cents for every state-generated dollar on Medicaid in 2013, the report notes.

Pew compared states’ Medicaid spending relative to their own resources in 2000 and 2015. In 2015, states collectively spent $211.6 billion of their own resources to provide health benefits for eligible low-income Americans, a $9 billion increase from 2014.

“But because states’ revenue rose slightly faster than states’ Medicaid bills, the program accounted for a smaller percentage of state-generated dollars: 16.7 percent – or 16.7 cents of each dollar – compared with 16.8 percent in 2014,” the report states.

The analysis found that only New York and North Dakota saw Medicaid spending fall as a share of revenue. Ten states spent their largest percentage of any year since 2000 on Medicaid, including Louisiana, whose share increased the most since 2000.

In 2015, the Pelican State spent 12.8 cents more of each state-generated dollar on Medicaid than in 2000.

“Louisiana’s ranking on this indicator is owed to a combination of relatively fast-growing Medicaid spending, as well as falling own-source revenue, after adjusting for inflation. Just 14 states saw their Medicaid spending grow faster from 2000-15, while Louisiana was one of only three states with drops in inflation-adjusted revenue over the period,” Matt McKillop, a Pew Charitable Trusts researcher, told Watchdog.org.

In Louisiana, federal government funds, including but not limited to Medicaid, comprise the largest share of the state budget. Federal revenue accounted for 42 percent of the state budget before Medicaid expansion ever went into effect.

“Federal Medicaid spending continues to rise because of Obamacare’s expansion of Medicaid to the able-bodied – enrollment in which has skyrocketed well beyond projections in most states that chose to expand,” Chris Jacobs, senior fellow at the Louisiana-based Pelican Institute, told Watchdog.org. “Louisiana’s budget was already the most dependent on federal spending before Medicaid expansion took effect. With federal debt at $21 trillion and rising, Louisiana should act to freeze enrollment in Medicaid expansion, and reform its Medicaid program overall, before Washington’s impending fiscal crisis affects the state budget.”

For every dollar that states spend on Medicaid, fewer are available to fund education, transportation, and public safety programs. State legislators are also hampered by mandatory federal spending requirements, the Pew report notes, which causes “policymakers to have less control over growth in their states’ costs than they do with many other programs.”

“The state Medicaid spending indicator excludes federal support and examines only the cost to states because that spending has a direct impact on state operating budgets, which rely on state-generated revenue,” Pew notes.

Six states spent more than one-fifth of their own-source revenue on Medicaid in 2015: New York (26.4 percent), Louisiana (23.3 percent), Rhode Island (23.3 percent), Pennsylvania (21.4 percent), Missouri (21.3 percent), and Tennessee (20.5 percent). New York spent the largest share of its own-source revenue on Medicaid in every year of the study period. Louisiana joined it for the first time since at least 2000, the study notes.

States that spent the lowest share of their own-source dollars on Medicaid in 2015 (less than 10 percent) were Utah (6.1 percent), North Dakota (6.4 percent), Wyoming (7.5 percent), Hawaii (8.3 percent), and Nevada (9.2 percent).

This article was first published on Watchdog.org.

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