Medicaid, the joint health insurance program between the Federal and state governments, experienced a dramatic rise in expenditures as a result of the recent recession. The Kaiser Foundation, a nonprofit organization, recently released a study detailing the effect the recession had on Medicaid and the costs states have incurred because of it.
Medicaid is designed to provide health care to the poor, and as the recession deepened more and more people applied for the program. Between 2007 and 2010, an estimated 8 million more people joined Medicaid. This resulted in an average annual cost increase of about 6.6%. Prior to the recession, Medicaid costs were growing at only about 1.3% per year. This sudden increase resulted in Medicaid spending growing from $330 billion in 2007 to $400 billion in 2010.
The slow economic recovery is further compounded by the budgetary crisis associated with Medicaid costs, and many states are looking at drastic cutbacks in services. Arizona, for example, has frozen enrollment into Medicaid, and Illinois is considering cutting back on $1.35 billion in yearly costs by reducing eligibility for the program.
Medicaid already encompasses a large portion of many state budgets. The Kaiser study showed that some states are currently spending about 1/3rd of their yearly budget on Medicaid, while almost all others spend 1/5th or more.