State and Local Healthcare Spending On the Rise

Although health spending at the national level grew by only 3.9 percent in 2011, state and local health care spending grew by 10 percent. Between 2008 and 2010, state and local health care spending grew by only 3 percent; According to a Pew report, however, the prior trend of decelerating healthcare spending at the state and local level was a result of the stimulus bill.

Under the American Recovery and Reinvestment Act (ARRA) and later legislation that extended certain ARRA provisions, the federal government contributed an extra $103 billion to Medicaid, with states receiving the bulk of that total in 2009 and 2010. So, while the recession swelled Medicaid rolls and drove increases in total program expenditures, states’ share of Medicaid spending actually declined from $146 billion in 2008 to $135 billion in 2010. The extra federal Medicaid money stopped flowing at the end of June 2011, which was the primary reason state Medicaid expenditures rose to $165 billion in 2011—a 22 percent increase from 2010.

The long-run trends is for healthcare spending to eat up a larger and larger share of state and local budgets; state and local health care spending as a share of revenue increased from 16 percent to 30 percent from 1987 to 2011. In fact, “the Government Accountability Office (GAO) warns that health care spending is the primary driver of the long-term fiscal challenges that it expects state and local governments will face.”

Infographics available here.

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