States continue to push for a health care overhaul and expanded coverage, even as Medicaid has become their costliest expenditure, according to a biannual fiscal state survey released Thursday.

At 21.1 percent, Medicaid spending comprises “the single largest portion of total state spending,” according to the report by the National Governors Association (NGA) and the National Association of State Budget Officers (NASBO). Total state spending is expected to increase by 6.3 percent this year. This is compared with the general growth rate of 5.1 percent, which is lower than the 6.7 percent historical average for growth and a drop from last year’s peak of 9.3 percent.

Medicaid spending among states is projected to increase 4.4 percent in fiscal 2009, which is more than four times the projected growth rate for states’ overall general funds. The one percent general fund spending increase for 2009 is the third lowest of the past 31 years and is significantly less than the 6.7 percent historical average, according to the study.

Despite these factors, which the report said reflect an economic downturn that is only expected to worsen, data shows states and governors are still working hard to overhaul health care. About two-thirds of all states made budget proposals last year to expand coverage, and 18 of them have already enacted or implemented their proposals. Twenty-six states have proposals to cover the uninsured for 2009.

“It is clear that covering the uninsured is a high priority across many state governments and many of the proposals have come from governors of both parties,” the report said.

Spending pressures for social programs and health care tend to increase as a result of slowing revenue growth caused by a weakened economy, the report said, but the biggest impacts in terms of budget cuts do not always surface until a year or two after a recession is over, according to NGA Executive Director Raymond Scheppach, who pointed to the economic situation in the early 2000s.

“The worst situation would be a three to four year struggle for states,” Scheppach said in the press conference Thursday, with factors including the housing crisis and the magnitude of a potential future oil crisis.

Another factor is Medicaid costs, which do not usually show an impact until the end of a recession as a result of lost income tax revenues from unemployment. Total state balances also are on the decline, the report said. After peaking in 2006 at 11.5 percent, balances are estimated to fall to around eight percent this year and decrease further to around 7.5 percent in 2009, according to the report.

So far, 13 states have had to make cuts to their 2008 enacted budgets, but there are still huge disparities among states based on how they perform. Around a dozen or so have escaped the housing crisis and are actually seeing revenue increases, especially in places with high energy and agricultural production, according to the report. But massive flooding in the Midwest has disrupted agriculture in some states and will “probably change their fiscal picture dramatically,” Scheppach said.

The number of states experiencing revenue setbacks from tax collections increased in fiscal 2008, with 20 states reporting revenue collections lower than estimated, compared with eight the year before. Fourteen states were on target with revenue collections and 15 states exceeded expectations.

“It’s not as bad as the post-9/11 downturn . . . but we are worried how bad it could continue to get” as we approach the 2009 fiscal year, said Scott Pattison, executive director of NASBO. He added that the economic concerns of budget officers are the same as the American consumers, who also worry the situation will steadily worsen.