One of the first things I do every morning after booting up my iMac is peruse the headlines in the gazillion e-mails I get from the bazillion news amalgamation services to which I subscribe (wait, is a gazillion bigger than a bazillion?). There are, of course, a fair number of articles about the Affordable Care Act and how it will bring about the end of the world, or prove to be the greatest achievement since man walked on the moon. Honestly, I rarely click on those links. I'm a bit tired of the Inside Baseball reporting on the daily political posturing.

No, what's really catching my eye these days are the machinations in the states. Every day, there are dozens of headlines that read something like this: State Budget Standoff Could Give Us Minority Rule, or Hospitals, Families Bear Brunt of NH Budget Cuts, or Demonstrators Across Texas Demand Fairness in Budget Cuts.

Across the nation, governors and legislators are grappling with severe budget crises. In some instances, the debates have played out in very public and high-stakes games of hide-and-seek. Democrats in Wisconsin and Indiana fled to Illinois to protest budget plans put forward by Republican governors. Lawmakers in other states are pushing politically unpopular proposals to drastically cut services, while some states, like Illinois, are both raising taxes and looking to cut services.

The Center of Budget and Policy Priorities last month reported that 44 states and the District of Columbia have projected budget shortfalls in FY 2012, which begins this July for most states. At least 26 states are already predicting shortfalls totaling $75 billion for FY 2013. Talk about having to bend a cost curve! Many states have a balanced budget law, which means they have to close the gaps as they did in 2009 and 2010. CBPP noted that most states instituted spending cuts, drew down on their reserves, increased taxes and deferred some very difficult decisions on pension programs.

Since it is one of the biggest line items in any state budget, Medicaid is a big target for budget cutters. This isn't necessarily anything new. Year after year, budgets get balanced on the back of Medicaid cuts, higher eligibility requirements, increased provider taxes or, often, all of the above. But the situation is slightly different now. Although the economy seems to recovering from the Great Recession, unemployment remains high. "Continued sluggish job growth will keep state income tax receipts at low levels and increase demand for Medicaid and other essential services that states provide," CBPP noted. Added to that is the fact that federal aid to the states will be severely trimmed as Congress and the Obama administration struggle to get the national debt under control. And we know what's scheduled to come starting in 2014—Medicaid expansion, assuming the Affordable Care Act isn't overturned. So, budgetary pressures on Medicaid will only grow and the impact on health care providers will certainly be dramatic. In Texas, lawmakers are considering a budget that would leave a $6 billion hole in Medicaid. Nursing home, safety net and other providers say that would force many facilities to close. Similar debates are raging across the nation, from New York to Ohio to Nevada.

One of my concerns is that we pay so much attention to news coming from D.C., that we often lose sight of events in our backyard. During the next couple of months, state lawmakers will be making very hard and very significant decisions. Health systems need to brace themselves for some serious belt tightening.

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