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Sharp Increase in Medicaid Enrollment Fuels
Spending Growth
The Commonwealth Fund
January 26, 2005
Public Interest Law Office of Rochester
A rapid increase in enrollment of low-income families drove a one-third increase in Medicaid spending between fiscal 2000 and fiscal 2003, according to a new report published Wednesday in the journal Health Affairs.
Medicaid spending grew an average of 10.2 percent annually during that three-year period. But steps that state governments took to control costs, such as reducing benefits or cutting provider payments, as well as a slowdown in enrollment slowed the increase to 7.1 percent in fiscal 2003.
The federal government also played a role in the fiscal 2003 slowdown, taking steps to limit states' use of upper payment limit programs-which brought in additional federal dollars that were not always used for health care proposes-and reducing federal payments to hospitals that serve a disproportionate share of low-income or uninsured patients.
"The real problem is rising health care costs and the states' ability to pay the bill, and not that Medicaid spending is out of control," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, which requested the report.
In an era of budget deficits, Congress is looking to rein in the cost of entitlements. Both Medicaid, the health insurance program for the poor that is funded jointly by states and the federal government, and Medicare, the federal health care program for the elderly and disabled, are targets for spending cuts.
Any changes to the Medicaid program "need to be balanced against the role Medicaid plays in health care spending," said Nancy Atkins, chairwoman of the National Association of Medicaid Directors. Any proposal to cap federal Medicaid spending would put states and beneficiaries "at risk," Atkins said, but added that states would like to have more flexibility to design and deliver benefits under the program.
Between fiscal 2000 and fiscal 2003, 68 percent of the growth in Medicaid spending was attributable to acute care and 30 percent to long-term care due to the faster growth in the enrollment of children and non-disabled adults.
Families accounted for 90 percent, or 8.4 million, of Medicaid's total enrollment growth, and only 10 percent from the elderly and individuals with disabilities.
The study's author, John Holahan, director of health policy at the Urban Institute, said the jump in Medicaid enrollment demonstrated the program's role as a safety net for individuals who have lost their employer-sponsored health insurance or hit other hard financial times. The increased Medicaid enrollment kept the nation's uninsured rate from increasing more than it would have otherwise during the three-year period, he said.
While 75 percent of Medicaid enrollees are children or adults from low-income families, they account for only 30 percent of program spending, according to Kaiser. Although only one in four Medicaid enrollees is elderly or disabled, they constitute 70 percent of the program expenditures.
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