Medicaid will cost state governments more than education for first time

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Medicaid will become the highest cost facing U.S. state governments in 2004, according to a report from state budget officers released Tuesday. This marks the first time that Medicaid will beat elementary and secondary education as the biggest cost for state governments, the report says.

The budget officers group expects Medicaid to be at the top of state expenses when fiscal year 2004 results are finally tallied, said Scott Pattison, executive director of the National Association of State Budget Officers. Fiscal year 2004 ended on June 30 for most states.

Medicaid rose 8% to account for 21.4% of all state spending in fiscal year 2003. That was narrowly ahead of the 21.7% of expenses states spent on elementary and secondary education.

Federal requirements mandating Medicaid coverage will force states to reduce other services, according to Raymond Scheppach, executive director of the National Governors Association.

The report's findings come as no surprise to Medicaid and state budget officials, who have named rising enrollment, costly nursing home care and hefty prescription drug costs as factors lifting state expenses.