638 ADDRESSES AND STATE PAPERS

that the Comptroller and the Board of Revenue Estimates take a fresh
look at tax collections, and the total revenue picture next month and
report their findings by the first week in March. This would permit
adjustments in appropriations, should the picture be brighter than it
now seems, before the enactment of the budget.

THE MEDICAID PROBLEM

One of the most important and sensitive programs caught in this
fiscal squeeze — and one of the most painful to reduce — is the State
Medical Assistance Program. It is principally a victim of soaring hos-
pital costs and a stringent Federal requirement that we pay the full
audited amount of average daily costs, which at some major hospitals
are rising $1 a month.

The f 46 million that we budgeted for the current year, on the basis
of paying hospitals an average of $47 per day for in-patient care this
year, is now running a deficit in excess of $5 million. In the new fiscal
year the total program would soar to $64 million unless we took drastic
action to curtail it. That action has been taken and is reflected in the
budget you are receiving today.

In order to continue the program at its present level through June
30, I am recommending a deficiency appropriation of $5 million,
bringing this year's total to some $51 million. The funds can be ob-
tained by eliminating the $5 million I had originally budgeted for a
cash down payment on capital improvements next year, completely
sacrificing that highly desirable fiscal policy which would save interest
charges on long-term bonds. This transfer represents a change from the
printed budget book since the decision was made after the budget
had gone to the printer. However, the proposed change is reflected in
the General Fund tables in this message and in the budget bill which
is being introduced in both houses today.

For the year beginning July 1, 1968 I am recommending that the
program be restricted to the new total of $51 million. This reflects
anticipated increases of 35 percent in hospital rates and therefore will
pay for fewer days of in-patient care. It means that unless hospital
costs have been brought under control and unless the Federal govern-
ment has relaxed its requirements to permit flexibility in administra-
tion, some 27, 000 persons of the 270, 000 now receiving medical as-
sistance will have to be dropped from the program on July 1, 1968. I
have issued an order to the State Health Commissioner to that effect.
Those affected in the cut are all non-welfare recipients, who are poor
nonetheless and in need of assistance, but they make up the major