Of Interest

How healthcare providers make, spend, borrow and invest money.

Better state budget picture, but Medicaid still in jeopardy

2:15 pm, Feb. 27

State budget shortfalls for the coming year total about $47 billion, the smallest aggregate deficit since the Great Recession, a report says.

The Center on Budget and Policy Priorities found deficits in 29 states for the fiscal year ahead and another 10 states reported revenue for the current year fell $3.2 billion short of budget. Gaps are significantly smaller than in recent years. The smaller shortfall is a marked improvement from the $106 billion this year (so far) and $430 million the prior three years, the report said.

Nonetheless, the gap is still large by historical standards, said authors of the report Elizabeth McNichol, Phil Oliff and Nicholas Johnson.

Continued state distress is troubling news for the nation's healthcare safety net. Medicaid budgets have been squeezed, including lower payments to hospitals and doctors, as states have struggled to balance budgets. That fiscal strain may also lead to more legal battles between states and the patients and providers who directly benefit from Medicaid coverage or payments, I report in this week's magazine.

That was the case in California where lawsuits over Medicaid rate cuts went all the way to the Supreme Court. Last week, the court left open the question of whether patients and providers can sue states in such cases and the California lawsuit will be argued again in a lower court.

I reported on the case in this week's magazine and quoted law professor Steve Vladeck, who observed that tight state budgets could bring the question before the Supreme Court again soon. “The tighter state budgets become … the more they're going to look at Medicaid as one of the appealing places to cut corners,” Vladeck said. Medicaid cuts could bring more lawsuits, he said.

Still, state Medicaid budgets have shown improvement, said Joan Alker, co-executive director of the Georgetown Center for Children and Families.

The Center on Budget reported “encouraging” growth in state tax revenue. But recent state economic gains are also not strong enough to quickly reverse the recession's drag, said the report's authors.

“Unfortunately, that hole was so deep that even if revenues continue to grow at last year's rate … it would take seven years to get them back on a normal track,” the report said. “In other words, revenues probably won't come close to what states need to restore the programs that they cut during the recession unless states raise taxes, at least temporarily, or receive additional federal aid while the economy slowly recovers.”

You can follow Melanie Evans on Twitter: @MHmevans.


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