The U.S. Government Accountability Office has a new report on state and local government finances. Of greatest concern are the expected increases in Medicaid spending and health care for government employees and retirees.
The primary driver of fiscal challenges for the state and local government sector in the long term continues to be the projected growth in health-related costs. Specifically, state and local expenditures on Medicaid and the cost of health care compensation for state and local government employees and retirees are projected to grow more than GDP.
This should be a major concern for Pennsylvania lawmakers and taxpayers, as Medicaid spending has been growing significantly faster than the economy.
Welfare spending, driven by Medicaid, is one of the four alarms that threatens Pennsylvania’s economy. As we have written about before, and noted in the GAO report, Medicaid costs will rise even faster under the new federal health care law, PPACA, which increases eligibility and includes a “maintenance of effort” requirement that prohibits states from making significant changes to existing programs.
For more on the fiery threat of rising Medicaid costs, check out our report, Ending the Cycle: Reforming Welfare in Pennsylvania.