**GAO-09-210T**                      Published: Nov 19, 2008. Publicly Released: Nov 19, 2008.                  

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## Highlights

GAO was asked to provide its views on projected trends in health care costs and their effect on the long-term outlook for state and local governments in the context of the current economic environment. This statement addresses three key points: (1) the state and local government sector's long-term fiscal challenges; (2) rapidly rising health care costs which drive the sector's long-term fiscal difficulties, and (3) the considerations involved in targeting supplemental funds to states through the Medicaid program during economic downturns. To provide Congress and the public with a broader perspective on our nation's fiscal outlook, GAO previously developed a fiscal model of the state and local sector. This model enables GAO to simulate fiscal outcomes for the sector in the aggregate for several decades into the future. GAO first published the findings from the state and local fiscal model in 2007. This statement includes August 2008 data to update the simulations. This Committee and others also asked GAO to analyze strategies to help states address increased Medicaid expenditures during economic downturns. GAO simulated the provision of such supplemental assistance to states. As we previously reported, the simulation model adjusts the amount of funding states would receive based on changes in unemployment and spending on Medicaid services.

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## Topics

Health Care

MedicaidLocal governmentsstate relationsFederal aid to statesHealth care costsCost analysisHealth care programsState governmentsState programsEconomic indicatorsEconomic policiesEconomic analysisFederal fundsFunds managementHealth care cost controlHealth care planningHealth care servicesFinancial analysisFinancial managementFinancial regulationState budgetsFuture budget projectionsFiscal policiesMedical economic analysis