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  1. Collins, Molly MSHA
  2. Bussard, Paula A. MHSA
  3. Combes, John R. MD


Abstract: Medicaid, the nation's health care safety net, has come under increasing pressure as most state governments face a fiscal crisis. Cutbacks in funding that decrease already inadequate reimbursement, the tightening of eligibility, and a reduction of benefits will lead to an increase in the under- and uninsured, further straining the ability of hospitals to remain solvent and provide care to this vulnerable population. The federal government must increase funding to the Medicaid program and the Medicaid hospital disproportionate share while state governments must continue a level of funding that will not cause a loss of federal matching funds. Both state and federal governments must be held accountable for providing the necessary financial support to providers through the Medicaid program so that they can continue to serve their nearly 51 million poor, disabled, and elderly patients.


STATE GOVERNMENTS ARE FACING the worst fiscal crisis since World War II. Revenues have fallen faster than expected, with shortfalls projected to reach $70 billion for fiscal year (FY) 2004 (Kaiser Commission, 2003). Medicaid is an obvious target for budget cuts since it accounts for 15% of total state spending-second only to education (Schneider & Rousseau, 2003). Although Medicaid spending grew by an unexpected $7 billion in 2002, its contribution to state deficits is modest when compared to the $62 billion shortfall in revenue collections (Kaiser Commission, 2003) State governments have been clamoring for federal help since the economy began to soften in late 2001. But it was not until Spring 2003, that federal fiscal relief was secured through Public Law 108-27, which provides a short-term infusion of $20 billion for states. Medicaid gets $10 billion through a temporary increase in the matching federal funds to states, and the remainder is distributed to states through a "revenue sharing" block grant. How states will use these new federal funds remains to be seen, but most states continue to face tough budget decisions.