Medicaid has become Massachusetts' preeminent budget buster. The largest single program in the budget, it will most likely be the most important source of spending increases between FY 1991 and FY 1995. But Massachusetts is not alone. Medicaid is producing budgetary headaches all across the country. This article explains why the Medicaid program has become a substantial burden for Massachusetts and other state governments and why that burden is likely to increase. It examines why Massachusetts' Medicaid expenditures are above average and outlines some policy choices.

One option involves promoting best-practice delivery and reimbursement systems to minimize unneeded care and increase efficiency. However, because Medicaid operates as part of state and national health care systems, it cannot be reformed in isolation. Achieving ongoing savings within Medicaid requires controlling costs throughout the health care system.