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NASBO Semiannual Report: Spending Growth Slows for FY 2023

The National Association of State Budget Officials (NASBO) released its semiannual state expenditures report, which examines several important aspects of state budgets.

High-level takeaways include:

  • governors’ budgets for fiscal year (FY) 2023 call for a 4 percent increase in general fund spending, following a record 13.6 percent spending growth in FY 2022;
  • FY 2022 general fund revenue is estimated to grow 3.2 percent, exceeding original forecasts; and
  • due to strong fiscal conditions, most states report minimal use of budget cuts.

State Medicaid Spending

Medicaid spending is forecasted to grow at a slower rate in FY 2023 compared with FY 2022, based on governors’ proposed budgets. Spending from state fund sources is projected to grow 15.6 percent, and federal fund spending is expected to decline 3.6 percent in FY 2023. Almost all states assumed the increased Federal Medical Assistance Percentage (FMAP) tied to the COVID-19 public health emergency would end either March 21, 2022, or June 30, 2022, and therefore did not include the increased FMAP in their FY 2023 budgets.

For FY 2022:

  • Medicaid spending from all sources is estimated to grow 11.1 percent;
  • state Medicaid spending is estimated to grow 11.3 percent in FY 2022, after a 2.9 percent increase in FY 2021; and
  • federal Medicaid spending is estimated to grow 11 percent in FY 2022, bolstered by the enhanced FMAP.

State strategies to contain costs and enhance their programs in FY 2022 and FY 2023 included enhanced program integrity efforts, policies to cut prescription drug costs, changes to managed care capitation rates to reflect decreased utilization, and delivery system changes. Program enhancements include increased provider payments for certain providers, expansion of behavioral health services, expansion or restoration of benefits, and telehealth.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Julie Kozminski is a policy manager at America's Essential Hospitals.

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