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States Struggling With Recession's Medicaid Cost Legacy

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The lingering effects of the recent economic downturn are still being felt as states continue to struggle with their Medicaid budgets.

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									                       States Struggling With Recession's Medicaid Cost Legacy

The lingering effects of the recent economic downturn are still being felt as states continue to struggle
with their Medicaid budgets. A new study released in early May from the nonprofit Kaiser Foundation
reports that the number of Americans seeking healthcare through the Medicaid program increased
dramatically between 2007 and 2009. In those years state Medicaid costs increased an average of 6.6
percent per year, according to the study. That represents an increase in government spending on
Medicaid from about $330 billion spent in 2007, to about $400 billion in 2010.

The 6.6 percent increase in spending per year far outweighs what had been the norm prior to the
recession. In 2005 and 2006, for example, Medicaid spending increased by about 1.3% per year. This
dramatic rise in Medicaid costs coincided with a sudden decrease in state revenues as the economic
downturn resulted in fewer collected taxes.

While the economic stimulus program of 2009 bolstered the Medicaid system by providing additional
funds to states, that money is now gone and states are struggling to cope with the increase. It's
estimated that a few states spend about one-third of their entire budget on Medicaid, while most
others spend at least one-fifth on the program.

States such as Arizona and Illinois have already begun cutting back on Medicaid spending by making it
more difficult for poor people to qualify for Medicaid, and other states may soon follow suit.

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