The only speaker standing between state budget officers and the opening cocktail hour at a Washington conference was the U.S. Secretary of Health and Human Services. What he said left no one in a celebratory mood.
Medicaid costs, said then-Secretary Michael Leavitt, were projected to grow so fast that within 10 years they would “crowd out virtually every other category of spending.” State spending on higher education, infrastructure and safety, he predicted, would all get squeezed.
Nearly 10 years after that October 2008 speech, Mr. Leavitt’s prediction—part of HHS’s first-ever annual projection of Medicaid’s costs—is looking prescient.
As state and local officials prepare their next budgets, many are finding that spending decisions have already been made for them by two must-fund line items that barely mattered when baby boomers such as Mr. Leavitt were growing up: Medicaid, the state-federal health insurance program for the poor and disabled, and public-employee health and retirement costs.
These days, they consume about one out of every five tax dollars collected by state and local governments. That is the highest share since Medicaid was created in 1965. Postretirement health benefits, which are harder to quantify, add to that burden and have cumulatively cost states more than $100 billion since 2008, according to government financial disclosures compiled by Merritt Research Services.