CMS Unveils Latest National Health Expenditures Estimates

On December 6, the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) unveiled its latest National Health Expenditures (NHE) estimates for 2017.  There were several noteworthy findings related to the Medicaid program:

Growth in overall Medicaid spending slowed to 2.9 percent in 2017, down from 4.2 percent in 2016. According to CMS in a companion Health Affairs study, this was the third consecutive year in which the rate of Medicaid spending growth fell.  Contributing factors included reduced growth in Medicaid enrollment and the recovery of some overpayments from Medicaid managed care plans as plan enrollment in prior years ended up being healthier than anticipated in the initial payment rates.

Medicaid spending per beneficiary grew by only 0.9 percent in 2017, even slower than the 1.2 percent growth in 2016. In addition to the recovery of managed care plan overpayments, CMS cited a 2.5 percent decline in per-beneficiary costs under the Medicaid expansion in 2017 as a key contributor.  An examination of CMS’s historical NHE data also show that 2017’s modest growth in Medicaid per-beneficiary spending is not a one-time event but instead is consistent with long-term Medicaid spending trends.  Between 2008 and 2017, for example, Medicaid spending per beneficiary grew annually by only 1.2 percent, on average.  In comparison, over the same period, private insurance spending per enrollee increased annually by 4.3 percent, on average.

Medicaid retail prescription drug spending growth declined significantly in 2017. Overall Medicaid retail prescription drug spending increased by 3.1 percent, down from 5.0 percent in 2016 and well below the rapid double-digit growth Medicaid experienced in 2014 (23.9 percent) and 2015 (11.6 percent) when the costly Hepatitis C breakthrough drugs entered the market.  While this is welcome news for state Medicaid programs facing higher prescription drug costs, drug costs are expected to continue to grow faster than spending in other benefits, according to the Medicaid and CHIP Payment and Access Commission.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.