33 states will cut Medicaid payments in FY2012

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Thirty-three states have now said they will further slash Medicaid payments to healthcare providers, according to a survey issued by the National Governors Association and National Association of State Budget Officers.

“[S]tates face numerous fiscal challenges as they enter fiscal 2012 including the withdrawal of significant funding that was provided through the American Recovery and Reinvestment Act of 2009 (ARRA),” the survey stated.

The cuts set to take place in fiscal year 2012 will employ both targeted and across the board cuts to reduce budget gaps and help get state budgets back on track. In addition to the 33 states that have proposed cuts, 16 states say that they will freeze provider payments while 12 states will raise provider taxes or fees.

In FY2011, 39 states have or plan on freezing Medicaid payments to providers. Likewise, 10 states plan to or have already raised provider taxes.

General fund spending in FY2012 will be $668.6 billion, $18.7 billion less than the pre-recession high of $687.3 billion in FY2008. Twenty-nine states face lower general fund spending in fiscal 2012 compared with fiscal 2008. Ten states reported that almost $12.1 billion in budget gaps must be closed by the end of FY2011.

Medicaid enrollment increased by 8.1 percent in fiscal 2010 and it is expected to increase. In fact, survey authors speculated that enrollment will grow an additional 5.4 percent in FY2011 and 3.8 percent in FY2012.

According to the survey, governors’ fiscal 2012 budget proposals will recommend tax and fee changes that will raise the general fund revenue by $13.8 billion. Compared with FY2011, governors recommended fiscal 2012 budget show a 0.3 percent increase in sales tax revenue, 6.8 percent increase in personal income tax revenue and a 4.3 percent increase in corporate income tax revenue.

Governors' proposed budgets for fiscal 2012 increased a 2.9 percent cut in Medicaid spending. According to the survey, federal funding for Medicaid is expected to decrease by 13 percent while state funds for Medicaid are set to increase by 18.6 percent.