Passage of healthcare reform in Washington sparked concern in some state capitals that Medicaid costs will quickly escalate, exacerbating the already unprecedented levels of deficits among state budgets. 

The Medicaid Program was established in 1965 as part of the Social Security Act and provides medical benefits to groups of low-income people. Medicaid is managed by the states within federal guidelines. Federal Center for Medicare and Medicaid Services (“CMS”) monitors the state-run programs and establishes requirements for service delivery, quality, funding, and eligibility standards. Medicaid is the largest source of funding for medical and health-related services for people with limited income in the United States. In 2008, it covered nearly 63 million individuals. Under the Health Care Bill, Medicaid will be expanded to cover all individuals whose income is 133 percent of the Federal poverty level.

Medicaid does not provide health care directly. Instead, it pays hospitals, physicians, nursing homes, managed care plans, and other health-care providers for covered services that they deliver to eligible patients. State and federal government jointly fund Medicaid. States provide up to half of the funding for the Medicaid program. In some states, counties also contribute funds.

Of most concern to states is the cost of health care reform on the state’s budget and the necessary dependence on federal dollars. In most states, Medicaid is among the top 3 budget items the states funds. On average, states spend approximately 22 percent of their budgets on Medicaid. To expand Medicaid necessarily requires states to relinquish control to the federal government in order to receive additional funding.

“Just being alive is not interstate commerce,” said Virginia Attorney General Ken Cuccinelli in a statement before the Virginia lawsuit was officially filed. Virginia’s General Assembly passed a law in 2010 stating that no resident can be compelled to have health insurance.


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