Fitch Predicts State Budget Imbalances Due to Medicaid Spending

States that are unable to accelerate their efforts to slow Medicaid spending will face long-term budget imbalances, according to a new report from Fitch Ratings.

CMS has predicted that state and local Medicaid spending growth will average 6.3% annually from 2004 to 2014, partially due to a downshift in federal funding for Medicaid expansion beginning in 2016. This spending growth will still remain below historical trends—from 1990 to 2007 the annual growth averaged 9.3%.

However, despite this slowed growth, Fitch expects it will still outpace revenue growth, forcing states to make challenging budgetary decisions.

“Federal coverage for newly eligible individuals in expansion states will begin a multi-year ramp-down in October 2016 from the current 100% to 90% in federal fiscal 2020 and thereafter. States will need to backfill the federal declines,” according to a press release from Fitch.