Medicaid Consumes More of Federal Aid to States and Localities

Medicaid has tripled as a share of federal outlays to state and local governments since 1980.
by | September 26, 2012 AT 1:00 PM

Over the last three decades, Medicaid has swallowed more and more of federal support to states, according to a new report from the Government Accountability Office, increasing from 15 percent of federal grants to state and local governments in 1980 to 45 percent in 2011.

In sheer dollars, federal Medicaid payments in 1980 equaled $33.7 billion and overall grants to state and local governments were $220.6 billion. By 2011, federal Medicaid contributions had ballooned to $274.9 billion, and overall grants sat at $606.8 billion. Medicaid outlays now makes up 7.6 percent of the entire federal budget, up from 2.4 percent in 1980.

With the Medicaid expansion under the health-care reform law set to take effect in 2014, and the federal government covering 100 percent of those costs, that percentage is likely to increase. The Centers for Medicare and Medicaid Services (CMS) have estimated that federal Medicaid spending will increase by more than 25 percent in 2014, to $356.3 billion.

Excluding Medicaid, other Health and Human Services (HHS) programs comprise 12 percent ($72.9 billion) of federal grants to state and local government, still the largest category. Education follows at 11 percent ($68.2 billion), then transportation at 10 percent ($60.9 billion) and housing and urban development at 7 percent ($41.2 billion). Agriculture (6 percent; $34.3 billion) and other programs (9 percent, $54.3 billion) bring up the rear.

Overall, though the dollar figure has increased substantially, state and local grants as a percentage of the federal budget have been fairly stable: 15.5 percent in 1980 and 16.8 percent in 2011.

The shift has been in priorities. While Medicaid and HHS grants have grown, others have flatlined or declined. Education, training, employment and social services have dropped from around 25 percent of state and local grants in 1980 to less than 20 percent in 2011. Transportation grants have hovered between 15 and 10 percent. Community and regional development support has stagnated below 10 percent.

The full GAO report is below.