Don't allow Medicaid program's budget impact to be overstated

The impact of Medicaid on state budgets is often overstated, according to a March 2011 report from the Georgetown University Health Policy Institute's Center for Children and Families in Washington, DC.1

"A lot of discussions about Medicaid right now are very politically charged," says Joan Alker, one of the study's authors. "We think it's important to ensure that they are fact-based."

There is no question that states are currently facing severe fiscal challenges, says Ms. Alker, co-executive director at the Georgetown Center for Children and Families and a research associate professor at Georgetown University's Health Policy Institute, but it's important to put Medicaid costs into context.

"We need to look at this from a historical perspective. These kind of cycles have happened before," says Ms. Alker.

According to the report, state spending on Medicaid actually declined by 3% in 2009. State Medicaid directors need to pinpoint the causes of increased costs in their Medicaid programs, she advises, which are likely due to enrollment growth and not cost growth.

This is an important point, says Ms. Alker, because enrollment growth will presumably slow down when the economy improves. It also underscores the fact that Medicaid is already a very efficient program, she adds.

"Some states are considering turning to private companies to reduce costs," notes Ms. Alker. "We know that health insurance in the private sector costs more than Medicaid, so that raises some yellow flags."

Offer 'Medicaid 101'

Some individuals may wrongly assume that particular numbers cited refer to state dollars only, warns Ms. Alker, when in fact the figure includes the federal Medicaid matching funds states receive. "When the federal share gets thrown in, it makes the program sound like more of a budget buster than it is," she says. "It also contributes to the dynamic of Medicaid competing with other priorities."

There has been a significant amount of turnover in state legislatures recently, adds Ms. Alker. "So when numbers are being thrown around, one can't assume that a legislator is going to intuitively ask the question, 'Are these just state dollars, or both state and federal?'"

For this reason, Ms. Alker advises state Medicaid directors to "do a little Medicaid 101." Explain the role of federal matching dollars, she recommends, with some analysis of the way the state's Medicaid program has changed over time.

"This is particularly important now, with the enormous amount of turnover and the ideologically charged debates," says Ms. Alker. "Cite the percentage of Medicaid spending as a share of the state general funds. I think that may be a surprising number to a lot of people."

Contact Ms. Alker at (202) 784-4075 or


1. Heberlein M, Alker J, Quasim Q. Medicaid and state budgets: Looking at the facts. Georgetown University Health Policy Institute, Washington, DC (March 15, 2011).