Medicaid | Medicaid Spending Growth Reaches Near-Record Low, State Revenues On The Rise, Survey Finds
[Oct 11, 2006]
Spending on Medicaid increased 2.8% in 2006, the lowest growth rate in a decade and the first time since 1998 that Medicaid spending growth has been less than growth in state revenues, according to an annual survey released on Tuesday by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured, the AP/Los Angeles Times reports (AP/Los Angeles Times, 10/11). For the report, researchers surveyed Medicaid officials from all 50 states (Carey, CQ HealthBeat, 10/10). The report found that the Medicaid spending growth rate declined for the fourth consecutive year, due in part to the implementation of the Medicare prescription drug benefit and an improved U.S. economy (Lawder, Reuters, 10/10). Economic growth contributed to slower Medicaid enrollment growth in 2006, according to the survey; the 1.6% enrollment growth is the lowest since 1999 (Lee, Washington Post, 10/11). Medicaid officials had predicted 3% enrollment growth for the year. The survey found that Medicaid spending growth would have been 1.7% in 2006 had states not been required to finance part of the Medicare drug benefit through the so-called “clawback” provision (CQ HealthBeat, 10/10). Based on state budgets adopted for fiscal year 2007, Medicaid spending growth is projected to increase to 5%, the survey found (Reuters, 10/10).
Policy Initiatives for 2006, 2007
All states in 2006 implemented at least one cost-containment strategy — the majority of which targeted provider rates and prescription drug spending — and 49 states are planning at least one cost-containment strategy for 2007, according to the survey. In addition, 49 states enhanced provider rates or expanded or restored benefits or eligibility in 2006, or plan to do so in 2007 (KCMU release, 10/10). CQ HealthBeat reports that the survey found states “are focusing on three particular areas for change in their Medicaid programs”: disease management, quality initiatives and the reorientation of long-term care services away from institutional settings (CQ HealthBeat, 10/10). Five states in 2007 plan to restrict Medicaid eligibility, and 26 states plan to either restore cuts made in previous years, increase Medicaid access by altering application and enrollment procedures, or begin new outreach efforts, the survey found (Washington Post, 10/11).
Deficit Reduction Act
The passage of the Deficit Reduction Act this year is prompting states to consider new options for Medicaid, according to the survey. More than half of states expect new citizenship documentation requirements that took effect in July to cause a decline in Medicaid enrollment. Most states also expect that the impact on beneficiaries of more stringent asset-transfer provisions for Medicaid nursing home eligibility will be “moderate” or “significant,” but will have a limited fiscal impact on the program, CQ HealthBeat reports (CQ HealthBeat, 10/10). Thirty-four states are planning long-term care partnership policies that encourage residents to purchase private long-term care insurance, applying for a demonstration grant to increase use of community rather than institutional services or adopting a plan that allows for self-direction of personal assistance services, the survey found. Several states are moving forward with more than one of these approaches (KCMU release, 10/10). The survey found that 22 states in 2007 will implement long-term care partnership programs that allow people to shelter some assets when they purchase qualified long-term care insurance (Reuters, 10/10). Nine states said their efforts to pursue a Medicaid waiver were modified after the passage of the DRA, according to the survey (KCMU release, 10/10). Idaho, Kentucky and West Virginia have used flexibility provisions in the DRA to alter benefits, and Kentucky also implemented new cost-sharing options, according to the survey.
Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of KCMU, said, “This news that revenues are up a little and that spending is down does not mean that states are going to give up on cost containment,” adding, “But it does allow states to take stock of what they’ve done when they were squeezing the program and see if there are places where they really need to make some fixes” (CQ HealthBeat, 10/10). Rowland said, “We now see that as the economy is improving that the states are looking at how they can best meet the needs of their citizens using the tools they have available to them” (Washington Post, 10/11). Vernon Smith, a principal of consulting at Health Management Associates, which conducted the study along with KCMU, said, “The pressure is not off Medicaid,” adding, “When state general fund spending is increasing 6.8%, they have to consider what they can do to control costs” (Reuters, 10/10).
The report is available online.