Medicaid spending becoming bigger share of state budgets

Although governors' proposed budgets for fiscal 2012 showed a 2.9% decline in Medicaid spending, state funds going to the program are predicted to increase by 18.6%, according to a spring 2011 report from the National Governors Association and the National Association of State Budget Officers.1

"Clearly, the current Medicaid path is not sustainable," says Matthew Mitchell, PhD, a research fellow at the Mercatus Center at George Mason University in Arlington, VA. "In the last two decades, it has doubled as a share of state spending. It's crowding out all sorts of things that everyone cares about, both conservatives and progressives."

Real inflation adjusted per capita cash assistance is down over the last 20 years ago, adds Dr. Mitchell, which can be attributed in large part to Medicaid spending. "Cash assistance that is not tied to a particular product is actually considered the most effective way to help poor people," adds Dr. Mitchell.

Dr. Mitchell notes that Utah recently passed a Medicaid reform plan which is asking for waivers to modify delivery and reimbursement methods. "Apparently, they did some analysis of what would need to happen if Medicaid continued on its present course," he says. "They looked at what would happen to other state programs — how many teachers would have to be laid off, how many universities would have to be closed."

Various stakeholders were involved early in the process, says Dr. Mitchell, including advocates of the Medicaid program. "They passed the reform, apparently with 100% support," he says. "The state is in a dire situation. They made good use of that, by recognizing there are even more difficult choices ahead if they don't change course."

Contact Dr. Mitchell at (703) 993-8940 or


1. The National Governors Association and the National Association of State Budget officers. The fiscal survey of states: An update of state fiscal conditions. Spring 2011, Washington, DC.