Medicaid’s Impact on State Budgets

View in your browser.

As North Carolina legislators debate tax reform and the budget, I have decided to take a look at what other states are doing with their budgets.  On July 1, the majority of states ended fiscal year 2013 and began fiscal year 2014, with 45 states having already enacted budgets for fiscal 2014.  Three state legislatures (IL, MA, and RI) have passed fiscal 2014 budgets and are awaiting action by the governor on at least some of their appropriation bills.  There are only two legislatures that have not yet fully finalized a budget but are continuing to operate under a continuing resolution, North Carolina and Oregon.

It is interesting to see how much other states spend in their budgets compared to North Carolina.  Obviously one cannot take these figures as an apples to apples comparison, since every state operates differently.  For example, North Carolina and Kentucky have a General Fund, which is the figure most common in debates and media.  Unless one understands that all transportation funding is done outside the General Fund in both of these states, it would be hard to compare their total budget numbers to other states that include all transportation within the General Fund.

In looking at a budget comparison chart, there are obvious outliers on both ends of the spectrum, Florida being on the high end and West Virginia on the low.  Many times state legislators look at neighboring states when debating legislation.  Tax reform in North Carolina has brought a lot of interest in both Tennessee and Florida, two nearby states that have zero personal income tax.  But when comparing,one must look at the whole picture.  What do the states have in common, and what is different?  There is one major factor that comparisons have found across all of the states in the most recent budget year — Medicaid.

All states have been forced to spend more money to allow the Affordable Care Act (ironically named since it isn’t affordable), and more specifically changes to Medicaid, to be implemented in the states, regardless of whether the state approved expansion or not. Governor Pat McCrory recommended spending an additional $575 million on Medicaid in North Carolina, and that was after the legislature rejected expansion.  Here are some statements from the National Association of State Budget Officers about Medicaid spending in different states’ budgets:

• Alabama — The Alabama Medicaid Agency accounts for nearly 40 percent of Alabama’s general fund expenditures.
• Arkansas — The Arkansas budget includes $90million in additional Medicaid spending to help address a shortfall.
• Florida — Health care spending continues to comprise a large portion of the state’s budget with recommended spending for the Department of Health and Human Services at $30.9 billion of which $22.5billion is dedicated for Medicaid.
• Georgia — Medicaid remains a major cost driver for the state,prompting the governor to recommend an additional $246 million for both the current budget and next fiscal year to meet rising demand.
• Mississippi — The proposed budget provides $878.4 million for Medicaid and notes that Medicaid spending needs may reach $921 million depending on the economy.
• Tennessee — Much of the additional spending will be directed towards health care, including $121 million to cover Medicaid eligible patients that were not enrolled prior to the passage of the Affordable Care Act and an additional $94 million to meet the inflationary rise in health care costs.
• West Virginia — The largest driver of budget growth is the state’s Medicaid program,which is projected to need an additional $142 million next fiscal year, while funding for all other program areas in the budget is expected to decrease by a net $21million.

So, as the North Carolina legislature continues to debate the budget and other bills that will have a fiscal impact on our state, we need to keep an eye on Medicaid spending.  The Affordable Care Act is not making the states’ jobs any easier or their budgets any smaller.