State governments across the nation are facing a steep challenge with Medicaid. Why? Because the people who stayed enrolled in Medicaid after the COVID-19 pandemic turned out to be sicker than anyone anticipated. This means the states are seeing a big jump in medical costs to care for these individuals. The situation is especially concerning in Pennsylvania. The state's governor, Josh Shapiro, has proposed a massive $2. 5 billion increase in Medicaid spending for the upcoming fiscal year. That's a huge bump in overall state spending, mostly due to the higher costs of treating the sickest people on the Medicaid rolls.

The problem started during the pandemic. People avoided going to the doctor, leading to worsening conditions. These delays made treatments more complex and expensive. The state's administration admitted that not having access to regular and specialty care during the pandemic had a huge impact. This has led to more hospital visits, longer stays, and more complex health issues.

In Pennsylvania, the situation is so bad that the Alliance of Community Health Plans appealed to the federal government to review Medicaid reimbursement rates. The alliance, representing non-profit insurers, argued that the rates were too low and based on outdated information. Dan Jones, the alliance's senior vice president for federal affairs, said that these insufficient rates were putting some of their members at risk of closing down. A lot of people were kept on Medicaid during the pandemic because of federal protections.

The end of pandemic-era protections meant that states began to reevaluate who was eligible for Medicaid. This is when they realized just how sick many of the remaining enrollees were. The average cost per recipient started rising just as federal aid ended. Edwin Park, a research professor, said that many states and Medicaid directors had been worried about this.

Surveys showed that most states expected a budget shortfall for Medicaid. Many states also reported asking the federal government for permission to increase reimbursement rates because their enrollees were sicker than expected. Indiana, for example, had to make cutbacks after underestimating its Medicaid costs by nearly $1 billion.

In Pennsylvania, the $2. 5 billion projected increase in Medicaid costs is a big problem, especially given the state's slow-growing economy and shrinking workforce. Tax collections are not expected to rise much, making it even harder to cover the increased Medicaid costs.

Pennsylvania's Senate Appropriations Committee Chairman Scott Martin said that the pandemic "paused" efforts to make the state's Medicaid program more efficient. Federal aid helped cover the costs, but now that it is gone, states are looking for ways to save money. The question is whether the new administration will give states more flexibility to implement cost-saving measures.

State Medicaid Costs Skyrocket

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