Medicaid Spending Grows Slower than Private Insurance
January 26th, 2005Health Affairs Article Finds Medicaid Costs Slowing and Per Enrollee Cost Growing at a Slower Rate than Private Insurance Spending
A Sharp Rise in Enrollment During the Economic Downturn Triggered Medicaid Spending to Increase
by One-Third from FY2000-03
Here is the full text of the Kaiser Network's
summary of the data:
Washington, D.C. - Medicaid spending
increased to $276 billion by fiscal year (FY)2003, up one-third from FY2000,
according to a new web-exclusive article released today by the peer-reviewed
journal Health Affairs and commissioned by the Kaiser Commission on Medicaid and
the Uninsured. Increased program spending was largely driven by rapid increases
in enrollment of children and parents in low-income families.
Urban
Institute researcher and study author John Holahan concludes that, “Medicaid
played its role as a safety net, providing coverage to those facing economic
declines and loss of employer sponsored insurance, but the result was a
sharp increase in program costs.” He added, “Medicaid enrollment growth
undoubtedly kept the uninsurance rate from increasing more than it
otherwise would have during this period.”
For FY2000-03, Medicaid
spending grew at an average of 10.2 percent annually. However, state Medicaid
cost containment actions—ranging from curbing provider payment rates to reducing
benefits—and a slowing of enrollment growth served to moderate Medicaid spending
growth in FY2003. The 7.1 percent growth in FY2003 is comparable to the
increases the program experienced in the late 1990s. See Figure 1.
“We
know states are struggling with Medicaid spending and the pressure it puts on
other state priorities, but this study shows that Medicaid costs actually grew
at a slower rate than private insurance costs. The real problem is rising
health care costs and the states ability to pay the bill, and not that Medicaid
spending is out of control,” said Diane Rowland, executive director of
KCMU.
Growth in Medicaid Spending vs. Private Insurance Spending
Comparing Medicaid’s purchase of acute care services to private
insurance costs shows the program’s cost increases are below those of private
insurance. The average growth rate of per enrollee Medicaid costs for acute care
from FY2000-03 was 6.9 percent—lower than the 9 percent increase in per enrollee
costs of the privately insured and substantially lower than the growth in
employer-sponsored insurance premiums (12.6 percent). See Figure
2.
Although Medicaid purchases health care services in the marketplace
for 75 percent of its beneficiaries, that is merely one of the roles the program
plays in the American health system. The bulk of Medicaid spending (70 percent)
finances health and long-term care for the 25 percent of beneficiaries who are
elderly or individuals with disabilities. The federal and state governments
share joint responsibility in funding the program.
What Drove
Medicaid Spending And Enrollment Growth?
Between FY2000-03, 68
percent of the growth in Medicaid spending was attributable to acute care and 30
percent to long-term care due to the faster growth in enrollment of children and
non-disabled adults into the program during the period. During this time period,
90 percent of Medicaid’s total enrollment growth (8.4 million) was from families
with only 10 percent from the elderly and individuals with disabilities.
Although families dominated Medicaid enrollment growth from FY2000-03,
they only accounted for 44 percent of Medicaid spending growth. The elderly and
individuals with disabilities accounted for 56 percent of spending growth.
Although the elderly and individuals with disabilities are a minority of the
Medicaid population, they are responsible for the majority of program costs due
to their intensive use of services.
The Health Affairs article,
“Understanding the Recent Growth in Medicaid Spending, 2000-2003” is available
online. A webcast of today’s policy briefing releasing the article in
Washington, D.C can be viewed online after 5 p.m. EDT.
Health Affairs,
published by Project HOPE, is a bimonthly multidisciplinary journal devoted to
publishing the leading edge in health policy thought and research.
The
Kaiser Commission on Medicaid and the Uninsured provides information and
analysis on health care coverage and access for the low-income population, with
a special focus on Medicaid's role and coverage of the uninsured. Begun in 1991
and based in the Kaiser Family Foundation's Washington, DC office, the
Commission is the largest operating program of the Foundation. The Commission's
work is conducted by Foundation staff under the guidance of a bipartisan group
of national leaders and experts in health care and public policy.
The
Kaiser Family Foundation is a non-profit, private operating foundation dedicated
to providing information and analysis on health care issues to policymakers, the
media, the health care community, and the general public. The Foundation is not
associated with Kaiser Permanente or Kaiser Industries.
CONTACTS
Rakesh Singh, KFF
(202) 347-5270
Jon Gardner,
Health Affairs
(301) 347-3930
Last updated on Friday, April 18, 2008.
