Fiscal conditions and state government policy choices

Decentralization of public program administration and financing to subnational units of government is examined in the context of hospital and nursing home assistance programs in the United States. Do subnational governments (i.e., states) adapt service utilization controls and tighter program eligibility during periods of fiscal austerity? Are these actions affected by expenditure levels, state budget balances, tax revenues, and the state's proportion of low income persons? Published data covering the period 1978-1982 from each of the 50 U.S. states were analyzed using multiple regression. States with a low proportion of low-income persons and a high per capita tax base were likely to increase minimum income eligibility standards to keep pace with inflation. All other states, regardless of fiscal condition, tended toward more restrictive income standards. States were equally likely to adopt utilization controls for health and long-term care services regardless of state revenue or health expenditures.