Since 2011, state spending on Medicaid has grown rapidly as enrollment increases and healthcare costs escalate. Growing enrollment, even prior to enactment of the Patient Protection and Affordable Care Act (ACA), has precipitated increasing program costs, while the end of temporary increases in federal assistance for the program has put additional financial burdens on states. As these trends continue, state budget officials and other policymakers are becoming increasingly concerned that the growth in state Medicaid expenditures will displace other state budget priorities.
In a new study for the Mercatus Center at George Mason University, policy analyst Marc D. Joffe examines state financial data to better understand the effects these trends in Medicaid are having on state budgets. The study finds evidence that growth in state Medicaid spending is crowding out spending on other major state programs, most notably education and transportation infrastructure. However, there is little evidence that growing state Medicaid expenditure is increasing state debt burdens. As the ACA continues to drive increasing enrollment in all states, those states that have opted for the Medicaid expansion will experience a greater fiscal burden as federal assistance for the expansion gradually shrinks.