Critical Condition
Surging Costs for Medicaid Ravage State, Federal Budgets
In Mississippi, Governor Sees 'Cancer on Our Finances' Amid $268 Million Gap
New Pressure From Bush Cuts
By SARAH LUECK
Staff Reporter of THE WALL STREET JOURNAL
February 7, 2005; Page A1
JACKSON, Miss. -- To see how Medicaid is devouring state budgets across the country, take a look at Mississippi.
Over the past five years state and federal spending in Mississippi on Medicaid -- the health program for the poor and disabled -- has doubled to $3.5 billion. Fully one-quarter of state residents are in the program. "Medicaid is a cancer on our state finances," says Mississippi Gov. Haley Barbour, the former head of the Republican National Committee and a close ally of President Bush.
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Forty years ago, Congress, as an afterthought to the Medicare program for the elderly, created Medicaid to help pay for the medical needs of about four million low-income people. Today, the program covers 53 million people -- nearly one in every six Americans -- and costs $300 billion a year in federal and state funds, recently surpassing spending on the federal Medicare program. In some states, Medicaid accounts for one-third of the budget.
The benefits offered by Medicaid have steadily expanded over the decades. The program now pays for 60% of the nation's nursing-home bill. It covers eight million disabled people and 25 million children. At many hospitals that cater to indigent people, Medicaid accounts for more than 40% of the revenue. "It has become a program that takes care of the worst situations," says John Holahan, director of the Urban Institute's Health Policy Center.
Now a state-versus-federal battle over Medicaid may be looming. President Bush, faced with a swelling federal deficit, will propose Medicaid changes in the budget he sends Congress today. The administration wants to cut about $60 billion from what it projects it will spend on the program over the next decade, mostly by cracking down on techniques used by states to collect extra federal payments.
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Write to Sarah Lueck at sarah.lueck@wsj.com
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