State Medicaid spending soars

WASHINGTON Tue Dec 13, 2011 3:49pm EST

People with disabilities rally at the Capitol in Washington, September 21, 2011. REUTERS/Jason Reed

People with disabilities rally at the Capitol in Washington, September 21, 2011.

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WASHINGTON (Reuters) - Spending by U.S. states on Medicaid, the healthcare program for the poor, soared last year and will likely continue growing despite measures to contain costs, according to a report released on Tuesday.

Total Medicaid spending, excluding administrative costs, likely reached $398.6 billion in fiscal 2011, which ended in June for most states. That was up 10.1 percent from the year before, when spending rose 6 percent, the National Association of State Budget Officers reported.

Medicaid was nearly one-quarter of all state expenditures in fiscal 2011, compared to elementary and secondary education, which accounted for 20 percent of all spending.

Based only on state general fund spending, which is backed by tax revenue, education represented 35 percent and Medicaid 17.4 percent.

States administer Medicaid with partial reimbursements from the federal government.

"The downturn in the economy has resulted in significant increases in Medicaid enrollment," the group said. "Enrollment growth averaged 5.5 percent in fiscal 2011 with states projecting Medicaid enrollment to grow by an additional 4.1 percent in fiscal 2012."

In 14 states, Medicaid represented more than 25 percent of total expenditures, and in 12 states Medicaid spending grew more than 10.1 percent. It spiked 40.8 percent in California, 22.7 percent in Hawaii, and 22.9 percent in Idaho. It dropped in Maine, Nebraska, North Carolina and New Mexico, mostly on a decline in federal funds.

Overall, collective state spending totaled $1.69 trillion in fiscal 2011 and $1.62 trillion in fiscal 2010. Expenditures, though, are still lower than before the housing downturn, the financial crisis and the recession hobbled state revenue.

Fiscal conditions will likely continue deteriorating through 2060 because of rising healthcare costs, the Government Accountability Office, the federal auditing agency, has warned. Medicaid spending will continue growing and because all states except Vermont must balance their budgets they will cut funds from other areas to put toward the program, it said.

Outside of increased demand, Medicaid spending also rose in fiscal 2011 because of the national healthcare reform law, which is on course to make more people eligible for the aid. The stimulus plan that expired in December gave states additional federal Medicaid funds to spend.

Still, "nearly every state implemented at least one new Medicaid policy to address costs in fiscal 2011," the report found.

"As in previous years, provider rate restrictions were the most commonly reported cost containment strategy," it said, meaning states likely paid doctors less. "States continued to eliminate, restrict or reduce Medicaid benefits such as dental, therapies, medical supplies, durable medical equipment and personal care services."

The Affordable Care Act, enacted in 2010 to extend healthcare to all Americans, will expand Medicaid's reach beginning January 1, 2014. It also relies on states to create exchanges to sell health insurance to individuals.

"Some of the most significant challenges include upgrading current Medicaid eligibility systems, accommodating the significant number of new enrollees under Medicaid, setting up health insurance exchanges, and dealing with the lack of administrative resources and staff at the state level," the report found.

The budget officers said states will likely have "austere budgets for at least the next several years and will continue to make difficult spending decisions" from insufficient revenues, the loss of stimulus money, long-term liabilities such as pensions and "uncertainties regarding national economic growth, healthcare reform, future federal funding levels."

(Reporting by Lisa Lambert; editing by Jeffrey Benkoe)

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Comments (8)
While there is no question that it is sorely needed, some people on it (and Medicare as well) are running to doctors UNNECESSARILY weekly. No wonder it has gone zowie. Some of the Medicaid recipients buy sneakers that no one else could even afford, run to dentists for dental work that is unaffordable to working folks.

Dec 14, 2011 9:59am EST  --  Report as abuse
moonhill wrote:
If you think it is bad now, wait until Obamacare fully kicks in. State budgets will collapse under the strain unless they got a special deal like Louisianna and some other states that took bribes for their representatives to vote for it.

Dec 14, 2011 10:44am EST  --  Report as abuse
txgadfly wrote:
If you continue to increase the production of poor people, especially through the systematic destruction of the “middle class”, you can expect your expenses related to the poor to increase. How much intelligence does it take to recognize the truth of this obvious fact?

You can increase spending on health care, food, and housing for the poor, or you can increase spending on Police and the Army to hold them down while you starve them to death, a la Somalia. The Somali path is primarily a Republican one, but the Democrats may simply be less open. Whichever path is chosen, it is time for those who think themselves “better” than everyone else in this country to face the consequences of their actions. Most of this results from ridiculous spending in the Middle East to deny Arabs the vote.

Dec 14, 2011 10:59am EST  --  Report as abuse
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