2010 will be a shocking year for state budgets
The expiration of Federal "stimulus" funding, coinciding with a continued slowdown in tax receipts, is going to make Medicaid look exceptionally burdensome in the next year or two. States have to share the cost of the program with the Federal government, and since almost all states (unlike the Federal government) are required by law to balance their budgets, big changes in funding for big programs like Medicaid are going to cause unusual amounts of pain. This highlights the problem of pushing too much responsibility of every type up the chain of command -- the disappearance of Federal funds in 2010 and beyond will only worsen the magnitude of the changes and cuts ahead. The Federal government today so dwarfs the states that minor changes in Federal policy can cause titanic problems at the state level. Were the states to be responsible for more on their own, many national-scale problems would be seen as 50 much more manageable state-sized troubles.