As states have faced large budget deficits, some politicians have laid the blame at Medicaid’s doorstep, saying that the program’s costs are growing “out of control” and that it is “crowding out” other priorities. While spending in Medicaid has grown as a result of increased enrollment due to the recession, most of this added spending has been born by the federal government. Although less frequently discussed, a greater challenge to state budgets during these difficult economic times has been the steep declines in revenues. In fact, state Medicaid spending and general revenues both declined during the last recession. This report examines the decline in state revenues and changes in Medicaid spending during the last two recessions to look more closely at what has been driving state budget deficits.
March 27, 2012