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State Medicaid spending soars under ObamaCare

Federal dollars given to states for Medicaid swelled nearly 18 percent this year to cover millions of newly eligible people, helping to reverse a years-long trend of shrinking state budgets.

Medicaid now makes up one-quarter of all state spending, with about $41.8 billion coming from the federal government over the last year, according to a report from the National Association of State Budget Officers. All other spending dropped $3.4 billion.

The explosion in spending is mostly a result of ObamaCare, which offered federal dollars to any state willing to expand its Medicaid program for low-income individuals and families. A total of 28 states, plus D.C., have opted for the expansion, which remains politically unpopular in many red states.

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As a result, enrollment soared 8 percent this year and is expected to rise 13 percent next year, according to the report. An increase in Medicaid sign-ups is crucial to driving down the uninsured rate and has been a key priority for Health and Human Services Secretary Sylvia Mathews Burwell.

About 68 million people are currently enrolled in Medicaid, which is expected to cost nearly half a trillion dollars this year.

While the federal government currently covers all costs of the expansion, that support will drop to 90 percent by 2020.

Those extra costs have scared some governors, who worry about being on the hook for millions of dollars more each year. The cost of the Medicaid program is already expected to grow 7 percent each year, which is far greater than the average growth of gross domestic product, according to government projections.  

Still, state spending increased less than 3 percent this year. The report also said that more states are trying to control costs by “changing delivery methods” and “selectively increasingly payments and benefits.” 

Medicaid is the second-largest piece of state budgets, falling just behind grade school spending, which has seen much smaller spending growths.

With the extra Medicaid dollars, the federal government is expected to provide about 40 percent of all state funding this fiscal year.