Reuters: Regulatory News: Budget cuts bigger risk to states than healthcare law-Moody's

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Budget cuts bigger risk to states than healthcare law-Moody's Aug 21st 2012, 18:19 Tue Aug 21, 2012 2:19pm EDT Aug 21 (Reuters) - When it comes to healthcare, Congressional attempts to reduce the federal budget deficit pose a greater risk to U.S. states' finances than an expansion of the insurance program for the poor known as Medicaid, Moody's Investors Service said on Tuesday. In June, the Supreme Court struck down part of the 2009 healthcare reform law compelling states to cover more people with Medicaid, and many conservative governors embraced the decision as a way to opt out of the expansion. Medicaid, which states administer with partial federal reimbursements, can consume up to a third of a state's budget. The healthcare law provides for states to receive reimbursements of 100 percent for the costs of new enrollees, but the amount tapers off to about 90 percent in future years. "States that opt into the expansion of Medicaid under the new law will have greater exposure to the potential risks that will come with efforts to trim federal spending," said Moody's Senior Vice President Kenneth Kurtz in a statement. "The extent of any effects on ratings will depend on how states respond to underlying cost drivers, including any new federal actions."

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