State governments are now facing serious upcoming spending deficits from the expansion of Medicaid via Obamacare.Before Obamacare, states helped fund their portion of medicaid spending while the federal government kicked in money for the rest. When Obamacare expanded, states received dollar for dollar matching from the federal government for even more expansion. Then some years down the road, that 100% matching would be reduced to 90% with states picking up the remaining 10%. Three things have happened since then which were very predictable:
- The 100% matching is now being reduced to 90%
- The estimated predictions of expansion costs have been grossly underestimated
- States revenue to spending is very flat. Any growth of revenue has been eaten up by other priorities or just spending expansion
Now the spending deficits are starting to pop up via medicaid. Here are some headlines:
- Medicaid accounts for almost 30% of all state budgets in 2018
- Rhode Island medicaid spending is running $29.5 Million over budget this year
- Medicaid spending is rising at 7.6% rate for state budgets compared to just 2.1% of spending
- Cost increases in Wisconsin over medicaid and education is so big, the state would need 3.8% and 5.3% revenue growth in the next two years. They will need a big tax increase to break even.
- Connecticut will face budget shortfalls in the billions with medicaid being cited as a big driver of the deficit.
- Massachusetts medicaid expansion spending is now running off the rails to where they have to limit the amount of prescriptions recipients can get (price controls)
- Nebraska faces a $100 Million budget shortfall due medicaid expansion
- Virginia missed the budget estimates so badly, they had to use the term “unexpected” when reporting a $462 Million shortfall in medicaid spending
States in the next 10 years will be facing spending cuts in areas of education and pension payments just to keep up with medicaid spending even after introducing tax hikes. Combine that with federal government either implementing massive tax hikes or spending cuts, the coming decision making from elected politicians will be one to watch.