Medicaid spending growth lowest in 10 yrs: survey
Posted Thursday, October 12, 2006
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Total spending on Medicaid grew at its slowest pace in 10 years, reflecting a better economy that has held down new enrollments, cost-containment efforts and a new federal Medicare drug benefit, a new survey showed on Tuesday. Spending for Medicaid, the state-federal health care program for the poor, grew 2.8 percent in fiscal 2006, according to the survey of state Medicaid directors by the Henry J. Kaiser Family Foundation. This marked the fourth consecutive year of slowing growth and the lowest increase since 1996, when it was 2.7 percent. The combined state and federal spending on Medicaid grew more slowly than state tax revenue for the first time since 1998, the study found. State tax revenue grew 3.7 percent in fiscal 2006, which for most states ended June 30. "The message here is that program continues to grow, but it is not out of control, or a (budget) Pac-Man as some have characterized it," said Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured. But based on state legislatures' budgeted Medicaid amounts for fiscal 2007, the survey estimated an average total Medicaid spending increase of 5 percent over fiscal 2006. Medicaid enrollment in fiscal 2006 grew 1.6 percent versus 2005, the lowest growth rate since 1999, the survey found. The growth in new enrollments has slowed since 2002, when recession-induced joblessness caused it to grow at an annual rate of 9.9 percent. That same year, total Medicaid spending grew 12.4 percent, while state tax revenue shrank 7.8 percent. The total spending growth rates in the survey include new state "clawback" payments to the federal government for those people whose drug prescriptions were shifted to the new Medicare Part D prescription drug benefit for senior citizens. These prescriptions had made up some 6 percent of total Medicaid costs, but under the clawback, states must make up part of those costs. The survey reported a continuing shift of Medicaid costs from the federal government to states. Nearly three quarters of states experienced a decline in federal matching funds for Medicaid in the last fiscal year. This kept growth in state general fund Medicaid spending from slowing as much as overall spending. The state general fund Medicaid expenditures grew 6.8 percent in fiscal 2006, compared with 8.7 percent in fiscal 2005.
State legislatures appropriated 6 percent growth in general fund Medicaid spending for fiscal 2007, again higher than the expected 5 percent growth in total spending. "The pressure is not off Medicaid. When state general fund spending is increasing 6.8 percent, they have to consider what they can do to control costs," said Vernon Smith, principal of consulting firm Health Management Associates. Many states are looking at new managed-care, cost-sharing and benefit-reduction options available under the Deficit Reduction Act of 2005. Only a handful have imposed copayments or reduced benefits, but more may consider such actions for 2008, Smith said. For fiscal 2007, more states were looking to expand coverage and enhance programs rather than to restrict programs. And no states had plans to cut reimbursement rates for inpatient hospitals, physicians, nursing facilities or managed-care organizations, compared to six in the previous year and 21 states in fiscal 2004. The Deficit Reduction Act also makes it more difficult for elderly persons to transfer assets to another person to qualify for Medicaid nursing home care.
The Kaiser survey found that 22 states in fiscal 2007 are implementing long-term care partnership programs that allow persons to shelter some assets when they purchase qualified long-term care insurance.
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