Three years of state fiscal struggles: How did Medicaid and SCHIP fare?

During 2003-05, states faced some of the largest budget shortfalls since World War II. With a focus on Medicaid and SCHIP, we examine budget decisions in eight states during this period. Increasing Medicaid enrollment because of the economic downturn and rising health care costs compounded state budget shortfalls as state revenues dropped; problems peaked in 2004. States, however, were reluctant to confront their budget deficits as long-term problems and implemented a variety of one-time revenue strategies and spending reductions that push fiscal problems into the future. The arrival of federal fiscal relief in late 2003 helped states avoid deeper cuts but did not eliminate cutbacks.