Medicaid Growth Slows; Medicaid Directors’ Innovative Efforts Expand

By Tara Mancini

Overall, the economic conditions surrounding state Medicaid budgets are continuing to improve, even as states make their way through the first full budget year after the American Reinvestment and Recovery Act enhanced FMAP funding expired.  In January 2012, unemployment hit a three year low of 8.3 percent, down from 9.4 percent a year earlier.  Expected growth in Medicaid spending slowed to 2.2 percent – one of the lowest rates on record – and the assumed growth in Medicaid enrollment declined to 4.1 percent on average, compared to 6.6 percent in FY 2011. 

While things are looking up, The Kaiser Commission on Medicaid and the Uninsured’s Mid-Year State Medicaid Budget Update for FY 2012 does point to some sizeable discrepancies between state budgets. As of mid-year, 10 states specified that they have to make Medicaid budget cuts, on top of the cost containment measures already reported at the beginning of the budget year.  This is only one less state when compared to last year’s mid-year update.

It is not completely surprising, given the differences in budgetary certainty that states reported in Kaiser’s Annual 50-State Medicaid Budget Survey.  Some states were quite confident, as 11 states had predicted negative growth in Medicaid spending, and five assumed zero growth.  Yet, other states felt more precarious about their financial outlook.  Almost half of the states suggested a 50 percent chance that they would have to make mid-year Medicaid budget cuts, while a quarter of states were certain that they would face mid-year Medicaid budgets gaps.

A number of states are showing interest in taking advantage of new opportunities in providing care for those with dual eligibility. The options offered by the Medicare-Medicaid Coordination Office have opened up the possibility for better integration between the two programs, and Medicaid directors hope that it will lead both to better health care outcomes and shared savings for each program.

Finally, the report notes that the majority of Medicaid directors (38) have announced plans to take advantage of the 90/10 federal matching funds available for states to update their eligibility systems in preparation for the Medicaid expansion required under health care reform. 

The slow and steady recovery of the economy has lead to the gradual increase in state revenues and a decline in Medicaid enrollment and spending.  At the same time that states are still in recovery, they are covering a greater share of Medicaid costs, due to the expiration of enhanced FMAP funds.  Given limited means in which they control costs, states are becoming more savvy; examining how they can better coordinate the care of the their most expensive Medicaid enrollees, and how they can use federal funds to make their eligibility systems work smarter.