Medicaid Spending Trends over the Past Decade

The recent recession has had an impact on Medicaid spending, increasing monthly enrollment by the largest amount since the program was implemented. The Henry J. Kaiser Family Foundation’s Kaiser Commission on Medicaid and the Uninsured analyzed data on program enrollment from a survey of all 50 states conducted by Health Management Associates and found that the growth in Medicaid spending typically follows the trends of economic growth. Medicaid enrollment increased by nearly 6 million people, or 13.6%, between December 2007 and December 2009. The Medicaid fiscal spending in that 2-year period increased from $338 billion to $387 billion. The American Recovery and Reinvestment Act was the primary reason for this tremendous enrollment growth due to its protections against eligibility restrictions and expansion of eligibility in certain states. The increasing unemployment and rising income inequality in the United States are also contributors to growth in Medicaid enrollment, according to Kaiser’s findings. Medicaid enrollment for the elderly and disabled grew at a steady rate, between 2.4% and 3%, during 2000-2009. Kaiser found that the increase of the aged and disabled dependent on Medicaid was associated with several factors: the generation in the 55- to 64-year age range, when the likelihood of disability increases, is beginning to expand the elderly population; advances in medical treatments and pharmaceuticals lengthen lives and increase the number of elderly persons living with disabilities; and the increased ability to identify and treat chronic conditions, including mental illnesses, which may contribute to enrollment growth among the disabled. Spending on acute care has consistently grown faster than spending on long-term care. Acute care spending increased by 9.6%, and long-term care spending increased by 5.8%. Medicaid spending on prescription drugs and managed care has also risen between 2000 and 2009, with an 11.7% and 13.1% increase, respectively. Overall, spending on all medical services rose by 8.2%. Family enrollment in Medicaid increased by 3.3% in 2008 at the beginning of the recession and rose again by 9.3% in 2009 as the recession progressed. Because acute care spending grew more rapidly than long-term spending, expenditures for families grew more quickly than for the aged and disabled. Growth in managed care spending rose from $26.5 billion in 2000 to $80.5 billion in 2009, and Kaiser speculates that this is due to changes in state policies such as the expanded use of Medicaid managed care for disabled populations. Managed care spending increased faster than fee-for-service spending, according to this research. Spending on home health and personal care grew at a rapid rate, as states have increased resources for home health and personal care. Pharmaceutical spending was on the rise during this period. There was a slower growth in Medicaid drug spending between 2004 and 2007 due to efforts by states to control drug spending through dispensing limits, preferred drug lists, and generic substitutions; however, prescription drug spending spiked in 2008 and slowed to a modest growth of 3.2% in 2009. Medicaid growth on medical services throughout the period exceeded increases in national health spending. During this period, Medicaid spending increased annually by 8.2%, while national expenditures increased by 6.9% per year. Medicaid expenditures per enrollee, however, did see growth similar to the consumer price index (CPI) for medical care. The medical care CPI grew 4.1% annually over this period, while spending per enrollee on medical services increased by 4.6% per year. Kaiser found that Medicaid spending has grown more slowly than employer-based premiums throughout the decade, showing Medicaid has controlled per capita costs better than private coverage. According to this research, many are hopeful that improved coordination of services between Medicare and Medicaid could produce efficiencies that reduce the rate of spending growth between the 2 programs. It is estimated that drug spending will accelerate faster in the long term than spending on hospital costs and other medical services. Overall, Medicaid spending has not increased much more than the growth in medical care inflation, and it has increased more slowly than national health expenditures per capita and private health insurance premiums.