The Big Shift
More Pressure on State and Local Budgets
S tates will vary in their response based on geography, local economies, the urban- rural mix, technological sophistication, economic development, and level of commitment to social welfare and education. But in general, stress on state budgets will create pressure to raise taxes, delay capital spending, defer maintenance, reduce training programs, bypass needed technological improvements, increase debt, shortchange long-term fiscal commitments (for example, to pensions) and reduce aid to localities. On the other hand, budget and political pressure may also accelerate technological innovation and increase collaboration among governments and with the private sector and academia. Most recently, a $1 trillion reduction in Medicaid funding over the next decade was passed as part of the mega-budget bill signed by President Trump at an Independence Day celebration on the White House lawn. Those cuts and the accompanying rules have an obvious impact on lower-income individuals who depend on public insurance for health care. They will also prompt an onslaught of new administrative duties for state managers
as they deal with stricter rules for eligibility determination and new Medicaid work requirements. These additional requirements could provide new private sector opportunities. But that will depend on whether state budgets and spending priorities allow Medicaid programs to build upon contract relationships with companies that provide software solutions to aid eligibility verification, improve data sharing and use artificial intelligence (AI) to streamline Medicaid administrative processes. An emphasis on stronger fraud detection also favors businesses that offer technology for auditing health claims, tracking improper payments and analyzing data patterns that signal potential fraud. On the other hand, diminishing federal funds will likely have a negative impact on hospitals, Medicaid managed care companies, home health providers, nursing homes and medical professionals. In addition, about $300 billion carved from the Supplemental Nutrition Assistance Program and school meal funding will deliver a blow to the bottom line of grocery stores and other small independent businesses.
“Cities, towns and state governments alone are not prepared to fill the gap from the federal government potentially pulling back from its current role.”
Clarence Anthony, CEO and Executive Director, National League of Cities
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