New Data Show Medicaid Spending Growth Declined in 2011
By Christine Vestal, Staff Writer
Medicaid is still the biggest single item in state budgets, but it is no longer the fastest growing expenditure. Total spending on the federal-state health care program for low-income people increased by only 2.5 percent in 2011, according to new data from the Centers for Medicare and Medicaid Services (CMS).That is among the lowest rates ever recorded, according to the Kaiser Family Foundation. It compares to Medicaid spending growth of 5.9 percent in 2010 and an average growth rate of 6.8 percent between 2007 and 2010.
The nation’s overall health care spending rate growth also hit an historic low. When all sectors were included, spending growth was only 3.9 percent in 2011, the same as in 2009 and 2010. That makes the three-year growth rate the slowest recorded since the data was first collected 52 years ago, according to an analysis of the data by Health Affairs magazine.
Although revenues grew slightly in 2011, states struggled to pay for their Medicaid programs because federal subsidies that had been in place since 2009 came to an end. The disappearance of those federal recovery dollars in 2011 meant states had to increase their own spending by 22 percent to make up the difference. To do that, states redoubled their efforts to rein in costs.
The primary reason for Medicaid’s slower growth, says Medicare’s outgoing chief actuary Rick Foster, was cuts to the fees states pay hospitals and other health care providers. States also cut benefits to beneficiaries, charged higher copayments, and introduced a variety of efficiency measures aimed at holding down costs.
In addition, increases in Medicaid enrollment declined from 4.9 percent in 2010 to 3.1 percent in 2011, as employment improved. Another factor affecting the slower rise in Medicaid spending was that many of those who became newly eligible for Medicaid after losing their jobs during the recession were healthier than the rest of the program’s beneficiaries. In fact, Medicaid spending per enrollee declined by nearly 1 percent in 2011, after increasing by about 1 percent the previous year.
Slow growth in hospital spending also contributed to Medicaid’s overall slower growth. The result of both lower rate increases and lower usage, hospital spending growth declined from 7.6 percent in 2010 to 2.4 percent in 2011, according to the Health Affairs analysis. Increases in both the cost and use of other health care services, including long-term care, also declined.
Although overall health care expenditure increases were lower than in previous years, a few sectors saw accelerated spending. Growth in the private insurance market increased slightly, from 3.4 percent in 2010 to 3.8 percent in 2011, primarily because of higher enrollment. Overall spending on retail prescription drugs went up 2. 9 percent and physicians and clinical services expenditures increased by 4.3 percent. Medicare spending went up 6.2 percent in 2011, compared to 4.3 percent in 2010.
The effect of the Affordable Care Act on the nation’s slower health spending numbers was minimal, according to the Health Affairs article. About 2.7 million adults younger than 26 years old were allowed to remain on their parents’ insurance policies, for example. But because most were relatively healthy, the spending increase was only slight.
The big question is whether three consecutive years of lower health care spending increases is an indication that Medicaid, and the nation’s health care system in general, is fundamentally changing. According to Foster, evidence suggests that the medical community is beginning to understand that “the future can no longer look like the past” when it comes to health care spending. Insurers, including Medicaid, are putting pressure on physicians, hospitals and other health care providers to provide more efficient services at lower prices, he says.