Health care reform is a many faceted problem. Between lowering costs, increasing coverage, balancing budgets, and maintaining quality, any reformer has his hands full. Throughout the debate we’ve highlighted the current version of the legislation’s negative effect on individuals and the size of the national government. However, this ignores one of the crucial impacts of health care – it’s effect on the states.

A recent study by the Center on Budget and Policy Priorities found that the recession has caused the steepest decline in state tax receipts ever, forcing states to deal with enormous budget gaps. As the number of employed goes down and corporate profits dwindle, states receive less tax revenue. Among the states facing the worst mid-year budget gaps are:

  • California: $6.3 billion
  • Arizona: $2 billion
  • Kentucky: $1.2 billion
  • Maryland: $936 million
  • New York: $3.2 billion
  • Washington: $2.6 billion
  • TOTAL Budget Shortfall: $33.9 billion

As shortfalls continue to pile up, states must make tough decisions on spending and service cuts. Now however, states already being squeezed by the economy may face the additional pressure of having to pay for the mandated expansion of Medicaid contained in the health care reform legislation. As Time Magazine explains ,

Congress is looking to expand Medicaid because in terms of raw costs, it is the cheapest and most efficient way to cover people of modest means. That’s in part because Medicaid pays doctors and hospitals far lower reimbursements than private insurance does and in part because the states pick up some of the cost.

Both House and Senate bills would pay the states’ share of the cost of the new patients over the first two years and up to 95% after that. But states would still face an enormous new financial obligation. There is also the question of finding enough providers to care for 15 million new patients. “It is a huge load on the states at a time when we are still climbing out of the recession,” Tennessee Governor Phil Bredeson said this week in Nashville. His state — already facing $1.5 billion in budget cuts this year and next — has estimated that the Senate version would cost it an additional $735 million from 2014 to 2019 and that the price tag of the House bill would be nearly double that.

Bredeson was not the only Governor to come out against the health care legislation. Governor Arnold Schwarzenegger who surprised many in December by saying ,

“I am one of the only Republican elected officials in the country to publicly support the president’s health care reform efforts. … But additional work is required. … The current structure and the proposed expansion of Medicaid under health care reform are unsustainable for California.”

He has now reversed his support for the health care plan because the Senate’s failure to address the new financial burdens on states, saying,

“You’ve heard of the bridge to nowhere? This is health care to nowhere.”

Young adults may wonder what kind of impact this will have on their lives. In one word: HUGE. Public universities are dealing with the dueling threats of increased applications and decreased state funds. As Terry Hartle, senior vice president for the American Council on education says ,

“It’s a balancing act. Just about every revenue source that colleges have is under distress.”

For instance, in California where the state budget is reaching record deficits, the public university system is projecting tuition increases of 9.3%. But this represents the tip of the iceberg. With state governments on the hook for billions of dollars to meet the mandated increases in Medicaid, public universities will have be faced with the tough choice of slashing the number of classes, raising tuition, or sacrificing quality. No matter what the decision, students are the ones who would suffer.

For a comprehensive list of the recessions effects on higher education, visit: http://recessionreality.blogspot.com/