Federal Medicaid spending grew by nearly 18 in 2014 over 2013, the National Association of State Budget Officers reported in a detailed analysis of state budgets. The federal government doled out nearly $42 billion to the states in new Medicaid dollars in the last year, helping to reverse a pattern set in the recession of shrinking state budgets.
The increased spending was the direct result of the Patient Protection and Affordable Care Act, which offered states additional Medicaid funding if they expanded their programs, the association's report said. State's own funds grew by 4.8 percent in 2014 over 2013, while federal funding increased by 7.6 percent this year.
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"Federal funds to states have fluctuated as a result of both the Affordable Care Act and the Recovery Act," the report said. "The increase in federal funds to states in fiscal 2014 was almost solely due to additional Medicaid dollars, mainly resulting from the expansion of Medicaid in some states under the Affordable Care Act. While federal Medicaid funds to states increased $41.8 billion or 17.8 percent in fiscal 2014, all other federal funds to states are estimated to have declined $3.4 billion or 1.3 percent."
Medicaid has been a major source of dollars for state budgets as they have emerged from the recession.
"Medicaid grew more sharply than all other program areas in both fiscal 2013 and fiscal 2014. Additionally, Medicaid grew from representing 24.5 percent of total state spending in fiscal 2013 to 25.8 percent in fiscal 2014, with the increase largely resulting from new Affordable Care Act funds," the report said.
In 2014, Medicaid spending by states outpaced spending on K-12 education — previously the largest piece of state budgets — as the federal dollars flowed in. It wasn't because states were dedicating fewer dollars to K-12 education, the report said. It was simply a matter of the sheer size of the federal support for Medicaid services.
"For example, in fiscal 2014 it is estimated that total elementary and secondary education spending grew 4.1 percent while total Medicaid spending grew 11.3 percent," the report said.
The flip-flop of state-vs.-federal spending on Medicaid as a result of the PPACA was dramatic. The report stated:
"In fiscal 2013, Medicaid total state expenditures increased 5.8 percent, with state funds growing 8.1 percent and federal funds increasing 4.1 percent. In fiscal 2014, states funds grew at a relatively low 2.7 percent while federal funds increased 17.8 percent due to increased Medicaid dollars provided through the Affordable Care Act. Additionally, in fiscal 2014, federal funds made up 60 percent of total state Medicaid spending, up from 56.6 percent in fiscal 2013."
But Medicaid spending didn't experience the highest percentage change in state general fund spending between 2013 and 2014. Transportation spending exploded as states got busy fixing roads that had been neglected during the recession. Here are the increases by major category:
- Transportation: 33.4 percent from 6.6 percent
- Medicaid: 5.8 percent from 2.8 percent
- K-12: 5 percent from 4.9 percent
- Higher education: 4.7 percent from 1 percent
- Corrections: 4.1 percent from 3.3 percent
Public assistance and "all other" spending fell compared to 2013.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
