Last week, 30 Republican governors and governors-elect, including Tom Corbett, sent a letter to the Obama administration and members of Congress asking for greater flexibility in managing their Medicaid costs. Already facing major budget shortfalls, exploding Medicaid costs could be what breaks the back of state budgets, including Pennsylvania’s.
The fact sheet accompanying the letter describes Pennsylvania’s prognosis thus:
Pennsylvania’s Medicaid program and current MOE requirements continue to place a heavy financial stress on the entire Commonwealth. Current estimates are that approximately $824 million will be needed in additional state Medicaid funds in FY 2011-12 due to enrollment growth in the existing program and utilization increases. An additional $1.4 billion will be needed to replace ARRA funding due to the expiration of the enhanced match, making the estimated increase in Pennsylvania direct funding for Medicaid at $2.2 billion for FY2011-12. Furthermore, it is estimated that Pennsylvania’s Medicaid rolls may grow by as much as 800,000 with the expansion under the Affordable Care Act. As the Medicaid population continues to increase and state revenues continue to not keep pace, the lack of any meaningful flexibility within the program will severely hamper virtually all other aspects of the state budget.
A Cato working paper looks at the expected growth in Medicaid spending in the five largest states—thanks to stagnant population growth, Pennsylvania is sixth on that ranking—both before and after Obamacare. As the estimates factor in current eligibility, state share, and rates of usage, it is not simple to estimate Pennsylvania’s costs. But in the two states closest to our population, Florida and Illinois, Medicaid spending from state general revenue are projected to grow by $4.6 billion and $2.2 billion, respectively, by 2014 under Obamacare.
This rate of growth is clearly unsustainable. As we’ve outlined in our Five Ways to Save $5 Billion, both overhauling the Medicaid system, and reforming the long-term care costs of Medicaid, are key to balancing Pennsylvania’s budget. Yet it will be difficult to achieve these reforms, absent greater flexibility from the federal government, or rejecting federal Medicaid funds entirely, as states like Texas are talking about.