States May Have Trouble Funding Medicaid Programs

June 8, 2010

The New York Times reports that states, after assuming increased federal funds for their Medicaid programs, are rightly worrying about what happens if that money does not come:

Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid.

… Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state's ledger, reducing its projected shortfall to $1.2 billion…

The Medicaid provision, which would extend assistance first granted in last year's stimulus package, was considered such a sure bet by many governors and legislative leaders that they prematurely included the money in their budgeting. But under pressure from conservative Democrats to rein in deficit spending, House leaders in late May eliminated $24 billion in aid to states from a tax and jobs bill that was approved and forwarded to the Senate.

The Senate plans to take up the measure this week, and the majority leader, Senator Harry Reid of Nevada, favors restoring the money, said his spokesman, Jim Manley. The House speaker, Nancy Pelosi, signaled last week that her chamber was open to reconsidering the appropriation.

If somehow the federal government did not end up passing more Mediciad funds down to states, the situation might seem open for states to proposal new taxes on hospitals. In Fiscal Fact No. 203 "State Hospital and Medical Provider Taxes: Not What the Doctor Should Order" we wrote on hospital taxes, whereby states tax health care providers and use this revenue to collect federal matching funds for their Medicaid programs.

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