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January 24, 2003

Study: Most states are cutting Medicaid spending this year

Forty-nine states have cut Medicaid or made plans to do so in the current fiscal year, and 32 have taken action twice, according to a new report from the Kaiser Commission on Medicaid and the Uninsured.

"Thirty-two states found it necessary to take further action to reduce spending for the year, and five states, which had not taken action prior to July, now feel cuts are necessary," according to Medicaid Spending Growth: A 50-State Update for FY 2003. The Kaiser Commission released the report Jan. 13.

Twenty-seven states say their Medicaid budget shortfall is exceeding their projections made at the start of the fiscal year, the Kaiser Commission said. Medicaid cost growth is expected to average 9 percent in the coming year-a figure that is almost twice the spending appropriated by most states. Enrollment in Medicaid programs is expected to grow by an average of 7.7 percent.

The report said states are taking a variety of actions to contain costs, including: reducing provider payments (37 states); imposing various controls on prescription drugs (45 states); and cutting or restricting eligibility (27 states).

New York State spends more than any state on Medicaid by far. Medicaid spending per capita in New York State is some two and a half times the national average. In the current fiscal year, New York will spend about $36 billion on Medicaid-which is more than 40 other states will spend in their entire state budgets.

The Public Policy Institute, the research affiliate of The Business Council, has identified this above-average Medicaid spending was identified as a major contributor to New York's current fiscal challenge.