GOP governors say Medicaid costs are already breaking states’ backs. Are they right?

July 3, 2012

The Republican governors vowing to opt out of Obamacare's Medicaid expansion argue the program is already burdening cash-strapped state governments and would be a poison pill for state budgets in the long run. Are they right?

When you look at all spending on state programs—including money from both federal and state governments—Medicaid is the single largest expenditure, at 22 percent, according to the Kaiser Family Foundation.

But when you isolate what states themselves have to put into Medicaid, the fiscal picture changes: Across the country, 16 percent of state general fund  dollars go toward Medicaid, less than half of what states spend on K-12 education:


(Kaiser Family Foundation)

The proportion of state spending on Medicaid has inched upward over the past 15 years. But the pace of growth has been fairly slow.

"Despite beliefs that Medicaid is claiming a larger share of state budgets, the share of state general fund dollars for Medicaid has remained fairly stable increasing from 14.4% in 1995 to 15.8% in 2010 at the same time general fund spending for education increased from 33.4% to 35.3%," Kaiser says.

The most recent uptick is largely due to the recession and the accompanying drop in state revenues, as well as the expiration of federal stimulus money for Medicaid.


(Kaiser Family Foundation)

What would happen to state budgets if all states went ahead with the Medicaid expansion? The Congressional Budget Office says that it would increase state spending on the program by $73 billion by 2022—the equivalent of a "2.8 percent increase in what states would have spent on Medicaid from 2014 to 2022 in the absence of health reform," the Center on Budget and Policy Priorities explained.


(Center on Budget and Policy Priorities)

That said, this is an aggregate look at the expansion: the budgetary impact on states will vary considerably, depending on how far a state has gone already to cover its low-income residents. The Urban Institute has a state-by-state breakdown of the impact, available here.

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