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Medicaid to Beat Education As Top Cost for States

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Reuters Health

By Kristin Roberts

Tuesday, October 12, 2004

WASHINGTON (Reuters) - Medicaid will become the No. 1 cost facing U.S. state governments in 2004, beating out elementary and secondary education for the first time ever, according to a report from state budget officers on Tuesday.

The cost of providing health services under the federal-state program for the poor and disabled climbed 8 percent in fiscal 2003 and came within a hair of overtaking elementary and secondary education as the top expenditure.

Medicaid accounted for 21.4 percent of all state spending while elementary and secondary education took 21.7 percent of state spending in 2003, according to the National Association of State Budget Officers' annual State Expenditure Report.

In 1987, the program accounted for only 10.2 percent of total state spending compared with the 22.8 percent of spending allocated to education, the budget officers' group said.

When final results are tallied for fiscal 2004, the budget officers group expects Medicaid to top states' list of expenses, said Scott Pattison, executive director of the group.

"It's amazing," Pattison said. "Based on the projections for the (fiscal year) 2004 data, we would expect that it has surpassed the (kindergarten through grade 12) figure."

Fiscal 2004 ended June 30 for most states. The expenditures data lags by about a year.

Raymond Scheppach, executive director of the National Governors Association, said federal requirements mandating Medicaid coverage would force states to cut back on other services.

"Since Medicaid is a federal entitlement and education is discretionary, Medicaid will trump education going forward," Scheppach said.

State budget and Medicaid officials, as well as health advocates, have warned for years that growth in Medicaid costs was unsustainable. Rising prescription drug costs, increasing enrollment and costly nursing home care have been cited throughout the country as the program's main cost drivers.

The Kaiser Commission on Medicaid and the Uninsured last week said Medicaid costs would continue to squeeze state governments in fiscal 2005 despite rising revenue collections and improving economies.



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