Revenue collections remained strong for most states in fiscal 2007, but Medicaid continues to be a major budget driver. The Medicaid program consumes approximately 22% of total state spending, while all state-provided health expenditures account for about one-third of average total state spending.

Health expenditures are the single largest portion of state budgets and threaten other state services, such as transportation, education, and public safety. Medicaid spending from all funds is expected to increase by 7.3% in fiscal 2007, following a growth rate of 1.7% in fiscal 2006.

States face a number of challenges in funding and providing health care, both within the Medicaid program and other health programs, including expanding access to health care for the uninsured and funding SCHIP. Long-term growth rates will continue to strain state budgets.