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June 2007

NGA and NASBO release The Fiscal Survey of States, June 2007

State fiscal conditions have been strong and stable, according to a new report released jointly by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). Medicaid continues to dominate state budgets; it represents 22 percent of total state spending, while all health care accounts for about 32 percent of total state spending.

Although Medicaid spending rates have moderated, Medicaid spending is estimated to increase by 5.8 percent in the governors’ recommended budgets for fiscal 2008, with state funds increasing by 7.0 percent and federal funds increasing by 4.9 percent.

The report highlights states’ aggressive use of cost containment measures in Medicaid. Over the past five years, every state has instituted cost containment measures—the majority of strategies have centered on freezing or reducing provider payments and managing prescription drug costs.

The NGA/NASBO report also found that health insurance issues have been increasingly important at the state level. According to the report, 34 governors introduced plans to reduce the number of uninsured residents in the upcoming 2008 fiscal year. These plans rely on a variety of mechanisms, including expansion of the State Children’s Health Insurance Program (SCHIP), traditional Medicaid expansion, using Deficit Reduction Act (DRA) flexibilities, waivers, and other state programs.

Some states are considering:

  • Employer requirements (five states);
  • Individual mandates (five states);
  • Personal responsibility requirements, such as requiring healthy behaviors and health screenings (12 states);
  • Flexibilities in the DRA to allow changes in benefit packages and cost-sharing (seven states);
  • Market-based approaches such as Health Savings Accounts or purchasing pools (12 states); and
  • Enrollment caps in state-sponsored programs that use public dollars so as to provide greater certainty in funding (seven states).

In 22 states, the expansion is targeted at children; 11 states want to expand coverage for childless adults, and seven states are envisioning health care expansions to cover all of the uninsured. To address concerns of eligible individuals not participating in Medicaid and SCHIP, about one-third of states have plans to improve outreach strategies and streamline eligibility.

According to the governors’ plans, the number of additional individuals that would be covered ranges from 268 to 4.8 million. The number of additional individuals covered depends on the scope of the state proposal, the state population, and the percentage of the state’s population that is uninsured.

Proposed fiscal year 2008 funding for these programs reaches nearly $18.4 billion. Most states are assuming that Medicaid and SCHIP dollars would fund about half of the $18.4 billion expansions, the majority coming from federal funds. Other funding sources are provider taxes or fees, tobacco taxes, state general funds, local government, redirecting dollars used for charity care, and contributions from participants and employers.