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Medicaid News
Medicaid Spending Growth Hits New Record Low for
States
Improving economy allows many to leave this safety
net for the poor
October 11, 2006 - State revenues increased faster
than Medicaid spending for the first time since 1998, according to a new
50-state survey released today by the Kaiser Family Foundation’s
Commission on Medicaid and the Uninsured. It finds that an improved
economy combined with the implementation of the new Medicare
prescription drug benefit has contributed to a low 2.8 percent growth
rate in Medicaid spending for fiscal year 2006 – the lowest rate in a
decade and the fourth consecutive year in which Medicaid spending growth
has slowed.
 Positive economic conditions also contributed to a
slowdown in Medicaid enrollment growth, which in turn helped reduce
spending growth. The 1.6 percent enrollment growth for FY 2006 is the
lowest rate since 1999 – nearly half the 3 percent growth predicted by
Medicaid officials for the year.
“When the economy improves, it is natural for
Medicaid spending and enrollment growth to subside because fewer people
turn to the program for assistance,” said Diane Rowland, executive vice
president of the Kaiser Family Foundation and executive director of KCMU.
“But with the continued growth in the uninsured population, Medicaid
remains on the frontlines for coverage for low-income children and
adults.”
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Medicaid News |
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Looking forward to FY 2007, the survey finds a
handful of states (5) plan to restrict eligibility while over half (26)
plan to restore cuts from previous years, expand to new populations, or
make positive changes to Medicaid’s application and enrollment process.
Additionally, states are contemplating new options and implementing new
requirements created by the passage of the Deficit Reduction Act (DRA)
this year, although few have used the flexibility to change benefits and
cost sharing requirements for FY 2007.
The budget survey of state officials, conducted by
KCMU and Health Management Associates for the sixth consecutive year,
found that the spending growth of 2.8 percent would have been even lower
(1.7 percent) had states not been required to finance a portion of the
new Medicare prescription drug benefit via what is known as a clawback
payment.
Despite the slowed growth, state Medicaid officials
indicate that growing health care costs and the erosion of
employer-sponsored health coverage are two reasons that overall pressure
to constrain Medicaid spending has not subsided. In fact, based on
budgets states adopted for FY 2007, Medicaid spending growth is
projected to increase to 5 percent next year.
Medicaid Policy Initiatives for FY 2006 and FY
2007
While cost control remains a priority, state
Medicaid officials appear to have moved away from a primary focus on
cost containment to a range of priorities including expansions or
restorations of eligibility and benefits, improving quality, and
changing the delivery of long-term care services. All states implemented
at least one cost containment strategy in FY 2006 and 49 states plan at
least one for FY 2007. As in previous years, most cost containment
strategies targeted provider rates and prescription drug spending.
Balancing the cost control strategies, 49 states implemented in FY 2006
or planned for FY 2007 strategies to enhance provider rates or expand or
restore benefits or eligibility.
States are increasingly focusing on three
particular areas for change in their Medicaid programs: disease
management and quality initiatives to provide better long-term value for
program dollars and improve health care for beneficiaries, especially
high cost cases, and the enhancement of long-term care services in home
and community settings to reorient the long-term care system away from
institutional settings, such as nursing homes, when appropriate.
State Reactions to the DRA
With several new Medicaid changes included in the
DRA, states are also adjusting their programs to accommodate required
changes and contemplating options available via the new law.
Over half the states expect the new citizenship
documentation requirements effective July of this year 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 Medicaid program.
States have plans to take advantage of new
flexibility in the DRA to change their delivery of long-term care
services. Two-thirds (34) of all states are moving forward with a
long-term care partnership policy to encourage the purchase of private
long-term care insurance, applying for a “Money Follows the Person”
demonstration grant to increase the use of community versus
institutional services, or adopting the cash and counseling option that
allows for self-direction of personal assistance services. Several
states are utilizing more than one of the approaches.
Few states have yet to take advantage of new
flexibility provided in the DRA to change benefits or impose cost
sharing in FY 2007. Nine states reported that their plans to pursue a
Medicaid waiver were changed after the passage of the DRA. Kentucky,
West Virginia, and Idaho (all states that had been seeking Medicaid
waivers to change their programs) have used the DRA to change benefits.
Kentucky also utilized new cost sharing options. Other states are
considering the new options for the future.
Editor's Notes:
Today’s released report,
Low Medicaid Spending Growth Amid
Rebounding State Revenues: Results from a 50-State Medicaid Budget
Survey State Fiscal Years 2006 and 2007, and related
materials are available online.
The Kaiser Commission on Medicaid and the
Uninsured provides information and analysis on health care coverage and
access for the low-income population, with a special focus on Medicaid's
role and coverage of the uninsured. Begun in 1991 and based in the
Kaiser Family Foundation's Washington, DC office, the Commission is the
largest operating program of the Foundation. The Commission's work is
conducted by Foundation staff under the guidance of a bipartisan group
of national leaders and experts in health care and public policy.
The Kaiser Family Foundation is a non-profit,
private operating foundation dedicated to providing information and
analysis on health care issues to policymakers, the media, the health
care community, and the general public. The Foundation is not associated
with Kaiser Permanente or Kaiser Industries.
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