Moody's Says Health Reform Will Stretch State Budgets

A new report by Moody's Investors Services predicts that new obligations on states to cover more Medicaid recipients under health reform will become "financially burdensome" in the long run, according to a report by Reuters.

The federal government will pay 100 percent of coverage for as many as 20 million newly eligible Medicaid recipients through 2016, then. Then the federal share falls to 90 percent. Also, states will not receive extra federal support to cover patients with income levels under current Medicaid eligibility but have not applied for assistance.

"Over the longer term, we expect these costs to become financially burdensome to states," Moody's said in the report. "States may also face higher administrative costs that come with increased coverage."

Medicaid already represents an average of 20 percent of state spending. While more people have signed up for Medicaid in the recession, states received a short-term boost in federal matching funds under the stimulus plan.

Read Reuters' report health reform.