The impact of health reform could be devastating to the budgets of states by 2014 — the year that Governors must kick in substantial additional expenses that will cover the uninsured who are absorbed into existing health care programs. The Patient Protection and Affordable Care Act of 2010 builds on existing state health programs (read: Medicaid and CHIP for children) to provide coverage for uninsured Americans in 2014.

Moody’s, the credit rating agency, has issued a report, Healthcare Reform Expected to Create Longer Term Financial Pressure for States, which finds that the states with largest gains in Medicaid enrollment will have the most significant financial burdens.

The National Council of State Legislatures (NCSL) has been analyzing the potential financial impact of health reform on the fifty states. At their meeting in March 2010, representatives shared forecasts of their states’ economic outlook for the next fiscal year and beyond. “Although spending overruns — especially for Medicaid — are increasingly pinching state budgets, the principal cause of budget gaps has been the steep drop-off in state revenues,” reported William Pound, executive director of NCSL. Through the first eight months of FY2010, 25 states reported that personal income tax collections were below expectations. Sales taxes were below forecasts in 23 states and Puerto Rico. Looking forward, data show that states will have a “rocky road” for several more years, according to the NCSL.

Since the recession kicked in in December 2008, Governors have been trying to juggle competing priorities in their states for education, health, transportation, and the myriad other services citizens expect to receive from their state capitols.

When the National Association of State Medicaid Directors met earlier this year, they estimated that states’ budgets would have a shortfall of $140 billion in this next fiscal year. Thus, even without health reform, Governors could have a difficult time meeting their current commitments to Medicaid programs as they are currently organized and populated. Some of the hardest-hit states – among them, Michigan, Missouri, Ohio and several western states – are among those with high levels of uninsured citizens.

Health Populi’s Hot Points: The title of the Rockefeller Institute of Government’s report published April 16, 2010, says it all: Revenue Declines Less Severe, But States’ Fiscal Crisis is Far From Over. The economy is declining in at least 28 of the 50 states, according to the Institute.

I’ve written here in Health Populi about the capacity limitations of the U.S. primary care infrastructure for absorbing newly-insured health citizens by 2014 (asking, “how do we bring sexy back to primary care?”). The Moody’s report, together with the details from the NCSL and the Rockefeller Institute, beg the question whether Governors’ budgets  in the most highly-health-uninsured states will have the ability to cover those promised coverage in the health reform bill? The answer, given the sad state of State financials, is a resounding, “No.”

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