10/25/2012 10:00 am ET

Medicaid Costs Rose At Slowest Rate Since 2006, Report Says

Medicaid spending increased during the 2012 fiscal year at the lowest rate since 2006, as a recovering economy reduced demand for the health care program for the poor and states enacted cost-cutting policies, according to a report issued by the Henry J. Kaiser Family Foundation Thursday.

Medicaid spending by state and federal governments, which share the program's costs, increased an average of 2 percent across the states and the District of Columbia during fiscal year 2012, which ended Sept. 30. That's down from 9.7 percent the prior year and the second-lowest rate of growth since the Kaiser Family Foundation began surveying states in 1998.

Growth in the number of people signing up for Medicaid benefits also slowed from 4.4 percent in fiscal 2011 to 3.2 percent in fiscal 2012, the survey said. Enrollment had grown at a faster clip since 2007, when it dropped 0.5 percent.

Medicaid provides health coverage to about 60 million Americans, mainly poor children and elderly people. The program also provides coverage -- which varies by state -- to pregnant women, the parents of poor children, people with disabilities, and some adults without children. The federal and state governments combined to spend $389 billion on Medicaid in fiscal 2010, according to the Kaiser Family Foundation, which produced the report with the consulting firm Health Management Associates.

States suffered budget crises during and after the recession that began in 2007 as tax collection declined and demand increased for safety net services like Medicaid. The economic stimulus enacted by President Barack Obama in 2009 provided extra Medicaid funding until June 2011. The stimulus also restricted states' ability to drop people from coverage, and Obama's 2010 health care reform law extended those restrictions.

Nevertheless, states used a variety of budget-cutting tools to get Medicaid costs under control, including enrollment freezes, prescription drug co-payment hikes, dental coverage cutbacks, and health care provider payment cuts, the Kaiser Family Foundation reports.

A major transformation is on the horizon for Medicaid, depending on the outcome of the election contest between Obama and Republican presidential nominee Mitt Romney.

Obama aims to expand Medicaid and the Children's Health Insurance Program, a related benefit, to 14 million people starting in 2014. The health care reform law will guarantee coverage to anyone, including childless adults, earning up to 133 percent of the federal poverty level, which is $14,856 this year. When the Supreme Court upheld the law in June, however, it made this expansion optional for states, and a number of Republican governors have said they won't participate.

Several states, including Minnesota, Colorado and New Mexico, actually expanded eligibility for their Medicaid programs during fiscal 2012 by taking up Obama's expansion early, which the health care reform law allows.

Romney supports a dramatically different approach to the program. The former Massachusetts governor wants to turn over control of Medicaid to the states, which would be free to reform or cut back the program with less federal oversight. As part of this plan, Romney would scrap the current entitlement structure in favor of a "block grant" program that would significantly cut federal spending and give states lump sums of money each year.

Rep. Paul Ryan (R-Wis.), Romney's running mate, authored a plan that would halve the number of people on Medicaid while cutting $1.7 trillion out of the program by 2022, compared to leaving current law -- including Obama's health care reforms -- in place, according to an analysis by the Urban Institute.



States With Medicaid Policies That Hurt The Poor