States Beating Federal Budget Negotiators to the Punch

Federal budget negotiators are considering sizeable cuts to Medicaid as part of a deal to raise the debt limit, but some states are beating them to the punch.

Indeed, many states have cut Medicaid spending significantly in the last few weeks in their budgets for the new fiscal year, which started on July 1 in most states.  These reductions come on the heels of widespread cuts that states enacted in their 2009, 2010, and 2011 budgets.

These state-level cuts save the federal government money as well (because the federal government shares Medicaid costs with the states), but they often come at a significant cost to low-income families and individuals.  To cite just three examples:

• Arizona’s budget eliminates Medicaid coverage for 100,000 poor adults without children and begins phasing out coverage for another 150,000.  It also eliminates coverage for 30,000 parents, cuts payments to health care providers, and allows the governor to impose new copayments and fees.  The cuts will save Arizona $482 million in the new fiscal year, and save the federal government $1 billion in matching dollars.
• North Carolina’s budget cuts Medicaid by several hundred million dollars over the next two years, primarily by cutting provider rates and reducing Medicaid services.  In total, the cuts will reduce federal matching spending by over $1 billion over the next two years.
• Wisconsin’s budget imposes more than $300 million in state Medicaid cuts over the next two years by freezing enrollment for in-home care for the elderly and people with disabilities and giving state officials broad authority to reduce participation and limit costs.  Those state cuts will reduce federal matching funds by $480 million.