Medicaid spending grew at an average rate of 8.8 percent in fiscal year 2010 across all states and the District of Columbia, according to the tenth annual survey of state Medicaid directors by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured (KCMU).

This was the highest rate of growth in 8 years and exceeded the 6.3 percent spending growth that Medicaid directors had expected; higher than expected enrollment, driven by the recession and job losses, was behind the higher spending. State legislatures have authorized a slower 7.4 percent rate of Medicaid spending growth for the current fiscal year, but two-thirds of states said the chances of a spending shortfall were at least 50-50. 

A separate KCMU report found that Medicaid rolls grew by 6 million people in the two years between December 2007 – when the recession began – and December 2009. At the end of this period, 48.5 million people were enrolled in Medicaid, an increase of 3.7 million people over December 2008. Both reports, along with a third report on workforce challenges faced by states in preparing for health reform, were discussed at a briefing today in Washington D.C.

The Importance Of Temporary Federal Assistance For State Mediciad Programs

Facing their largest recorded decline in revenues, nearly every state implemented at least one new policy to control Medicare spending, and a record 20 states implemented new restrictions on benefits in fiscal year 2010. However, the situation would have been much worse without the American Recovery and Reinvestment Act of 2009, which temporarily increased the federal share of Medicaid spending, know as the Federal Medical Assistance Percentage. This extra help to states was originally expected to end in December of this year, but in August Congress extended the assistance through June of 2011, though at reduced levels.

“Clearly without the enhanced FMAP, the story we are telling today would be quite, quite different. We would have seen cuts on a scale we had never seen before,” said Vernon Smith, a principal at Health Management Associates and the lead author of the survey of Medicaid directors.  With the FMAP increase, “for the first time in the history of the program, the state cost of Medicaid actually declined, by almost 11 percent in 2009, and by almost 7 percent last year in 2010.” (emphasis added) However, Smith warned, “there seems to be no end in sight for the fiscal pressure on Medicaid programs,” particularly with the expiration of the enhanced FMAP in June of next year and the resulting jump in state obligations.

Medicaid and health reform. Medicaid’s role will increase still further when the health reform fully takes effect in 2014. The program is projected to cover half of the 32 million people expected to obtain health insurance through the Affordable Care Act. This would amount to a 32 percent growth in Medicaid enrollment, Smith noted in a media conference call following the briefing, and he said that some have worried whether Medicaid will be able accomodate all of the new enrollees.

However, Medicaid enrollment grew 58 percent in the decade from 2000 to 2010 and 80 percent in the decade from 1990 to 2000, Smith observed. The coming decade will differ from previous ones and access to treatment is an important issue to watch, but “the system has been able to absorb fairly significant increases in the past and may very well be able to absorb those increase over the next decade,” Smith said. 

There is much more worth noting in the briefing and reports, including some intriguing on-the-ground observations from Carol Steckel, Commissioner of the Alabama Medicaid Agency, which we hope to cover in future posts.