Fitch Ratings expects health care costs, particularly Medicaid, will present the biggest challenge for states to achieve balanced budgets in the coming years, according to a special report. Although education historically has made up the lion’s share of most state budgets, total state expenditures on health and welfare are on track to eclipse education over the next decade.
Federal funding cuts not offset by reduced federal requirement would have a direct effect on states, possibly indirectly affecting some state economies.
During the recession, enrollment in Medicaid increased by approximately 6 million and total annual costs, both federal and state, rose by approximately $50 billion. The passage of the American Reinvestment and Recovery Act of 2009 helped cushion the effects of this increase on the states.
From October 2008 to June 30, 2011, ARRA provided an estimated $103 billion in additional moneys to the states for Medicaid, funding the increased demands and effectively freeing up funds that would have been spent on Medicaid for other areas of the state budget.
For details, see the full report, US State Budgets and the Growing Pains of Medicaid Costs.
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