Kaiser Survey Finds Medicaid Spending Growth is Down

By Tara Mancini

Last week’s release of the Kaiser Family Foundation’s 50-State Medicaid Budget Survey for State Fiscal Years 2012 and 2013 brings encouraging news.  The big picture findings from this 12th annual survey indicate that growth in both total Medicaid spending and enrollment were down in 2012.  Medicaid enrollment is projected to grow at an even slower pace in FY 2013.  Total spending will likely experience a small increase, yet would still be one of the lowest growth rates in Medicaid spending.

In FY 2012, total Medicaid spending increased by 2.0%, less than the 2.3% that had originally been appropriated.  This coincided with a slow down in enrollment growth, which in FY 2012 was 3.2%, down 1.1 percentage points from the previous fiscal year. In addition, enrollment growth is expected to drop another half of a percentage point in FY 2013.

The picture for state spending looks somewhat different, as FY2012 was the first fiscal year after the expiration of the American Recovery and Reinvestment Act enhanced FMAP.  From FY 2009 to FY 2011, when increased federal funding was made available for Medicaid, states were able to decrease their spending on Medicaid for the first time in the program’s history, by 10.9% and 4.9%, respectively. The loss of the enhanced federal funding for FY 2012 meant an initially bigger tab for states, especially given the recession- fueled enrollment in Medicaid.

However, gradually increasing state revenues and slower growth in Medicaid enrollment, coupled with targeted cost containment measures are, for many states, returning manageable growth rates to their Medicaid budgets. In adopted FY 2013, state spending is expected to grow at a rate of 2.3%, lower than the rate of total Medicaid spending.

Surely, states are still feeling fiscal pressure, as 48 of them implemented at least one policy to contain costs in FY 2012 and 47 states plan to do so in FY 2013. The most common policies for reining in costs are reductions to provider payments, transitioning to community-based long term care, and reductions to benefits and eligibility.   Yet, for FY 2013, there are more states enhancing eligibility, benefits, and long-term care delivery, than there are states making restrictions to these areas.  While provider payment restrictions outnumber enhancements, FY 2013 still represents a small decline in the number of payment restrictions.

Overall, the survey presents a promising outlook for state Medicaid budgets, which stand to further benefit from the full implementation of the ACA.