Key Takeaways
- Medicaid is a unique driver of state expenditures during economic downturns, given states’ limited remedies to counter rising costs of the co-funded federal-state program, which challenges their ability to sustain balanced-budget requirements.
- Federal spending has stepped in to fill the state Medicaid spending gap, including $33 billion through June 30, 2020 and $49 billion across the entire federal fiscal year 2020. States are estimated to have spent $10.2 billion from state-only resources, or 4.4%, above their fiscal 2019 levels.
- Medicaid enrollment surged between February and July. As spending and utilization catch up they will consume a greater share of state budgets.
- Slow economic growth and a premature federal fiscal austerity could compound Medicaid pressures and cloud state budget forecasts.