The federal government has paid out about 20 percent more to states since the start of the recession, an increase that’s almost entirely driven by exploding health-care costs.
Federal spending on health care spiked 34 percent between 2008 and 2014, though it dropped in nearly every other category, according to an analysis by the Pew Charitable Trusts.
Funding for education and transportation declined by double digits, in addition to a 13 percent decline in “everything else,” which includes veterans benefits, energy and agriculture.
Medicaid accounted for about two-thirds of all federal funding to states in 2014, up from 43 percent two years ago.
The health care spending boom is largely the result of Medicaid expansions in 27 states this year under the Affordable Care Act, which was expected to add about 17 million people.
The federal government is fronting nearly all costs to expand Medicaid over the next decade, including paying for each person who is newly eligible for the program. In comparison, the government funds about 57 percent of Medicaid programs that existed before the health care law.
Medicaid costs will continue to skyrocket over the next decade. The Congressional Budget Office predicts an increase of about 8 percent per year – outpacing the expected rise in GDP.
States have relied heavily on federal grants since the recession,. Federal funds now make up an average of $1 out of every $3 in state revenues.
Excluding health care spending, states are now receiving about 5 percent less than they did before the recession.