West Virginia’s finances are in good shape, especially when compared with many other states that are running huge deficits, raising taxes and laying off state workers.
But there is an ominous budget-buster on the horizon for West Virginia: Medicaid, the government health care program for the poor.
This fiscal year, West Virginia will spend $400 million on Medicaid, or about 10 percent of the general revenue budget. The total expenditure, however, is closer to $3 billion because the federal government pays about four out of every five dollars of Medicaid costs.
The state’s share of Medicaid dollars is about to rise dramatically. West Virginia’s portion next fiscal year will increase to $500 million and $650 million the following year.
Those are significant increases when you consider the state’s general revenue budget is just over $4 billion.
State Budget Director Mike McKown says there are several reasons for the dramatic rise in the Medicaid budget: medical costs continue to rise; a surplus in the state’s Medicaid Fund will soon be spent; and the federal match for Medicaid spending is declining.
But that’s not all.
McKown’s says the projected rise in Medicaid spending does NOT include the impact of the federal Affordable Health Care Act.
It’s estimated that the state’s Medicaid rolls will grow from about 415,000 currently to 550,000 starting in 2014 when eligibility is expanded to 133 percent of the poverty level. Initially, the federal government will pay 100 percent of the additional costs, but that will drop to 90 percent in 2020.
And who knows what happens after that? If Washington ever decides to get its financial house in order it may dump more of the Medicaid costs on the states.
All this means the state’s Medicaid costs are going to rise even higher. How much more is anyone’s guess, but current and future state administrations are going to deal with the exploding costs.
These rising costs are not easy to control. Government guidelines make it difficult to curtail services. Additionally, even optional services take on a life of their own because once a service is established, it’s hard to remove.
Politicians love to talk about the benefits government provides and with the Obama Health Care law kicking in, there are plenty more of those on the way, especially in Medicaid.
But they come with a cost, and in the case of Medicaid, West Virginian taxpayers better brace themselves for the coming sticker shock.