Medicaid costs were projected to grow so fast, according to U.S. Secretary of Health and Human Services Michael Leavitt, that “within 10 years they would ‘crowd out virtually every other category of spending.’  State spending on higher education, infrastructure and safety, he predicted, would all get squeezed.” Source:  Wall Street Journal, March 29, 2018

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Why Are States So Strapped for Cash? There Are Two Big Reasons

WSJ, March 29, 2018 – Excerpts:

“As state and local officials prepare their next budgets, many are finding that spending decisions have already been made for them by two must-fund line items …. Medicaid, the state-federal health insurance program for the poor and disabled, and public-employee health and retirement costs.

These days, they consume about one out of every five tax dollars collected by state and local governments. That is the highest share since Medicaid was created in 1965. Postretirement health benefits, which are harder to quantify, add to that burden and have cumulatively cost states more than $100 billion since 2008, according to government financial disclosures compiled by Merritt Research Services.

Those costs are outpacing growth in tax revenue year after year. In 2016, state and local governments collected about $136 billion more in taxes than they did in 2008, adjusting for inflation. Two-thirds of those additional dollars went to fund pensions and Medicaid, according to a Wall Street Journal analysis of Commerce Department spending data.

“The more we stare at the data, the more we realize all roads lead back to Medicaid and pensions,” says Dan White, a director at Moody’s Analytics who has studied the issue.

The resulting revenue squeeze is making it harder for governments to pay for core services such as education, infrastructure, police and fire protection.

The cash crunch is likely to get worse. Federal actuaries predict that Medicaid’s annual cost, which was $595 billion in 2017, will exceed $1 trillion in 2026. States and many localities pay about 38% of that tab. The remainder is covered by the federal government.”

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