Medicaid Enrollment Growth Is Slowing, But State Spending Is on the Rise

By Quinn Libson,
Staff Correspondent

Connecting state and local government leaders

| October 19, 2017

A new Kaiser Family Foundation survey of state Medicaid directors takes a close look at the fiscal outlook for the program.

Enrollment for the federal program that provides health insurance coverage for 1 in 5 Americans is slowing down nationally, while spending at the state level is on the rise, according to a new survey of state Medicaid directors conducted by the Kaiser Family Foundation and Health Management Associates.

State budgets for Medicaid have been in limbo for the past 7 months. These findings come on the heels of several congressional attempts to pass legislation that would repeal and replace the Affordable Care Act and gradually roll back the expansion of Medicaid that came with it.

The rate of growth in enrollment slowed to 2.7 percent for fiscal year 2017, down from a rate of 3.9 percent in the previous period. Medicaid directors across the country attribute that drop to a strengthening economy and a declining unemployment rate. An even greater drop in enrollment growth is expected for 2018 with state Medicaid directors projecting a growth rate of 1.5 percent for that year.

2017 also saw state spending on Medicaid rise, as states that opted to expand the program began to pay 5 percent of the cost of those new enrollees in January of this year. The growth rate of state Medicaid spending went from 2.4 percent in fiscal year 2016 to 3.5 percent in fiscal year 2017. However, it’s important to note that the spending rate was outstripped by the growth rate of state general funds in 2017.

State Medicaid directors project that spending will increase even more in 2018 with total spending set to increase by 5.2 percent. One factor on the minds of these directors that could be responsible for this increase in spending, and increases in years to come, is the advent of higher cost prescription drugs. This issue will only grow more complicated as the pharmaceutical industry inches closer and closer to bringing treatments to market that cost as much, or more than, $1 million per dose.

Looking to the fiscal year ahead, state Medicaid directors identified a few factors that have the potential to cause them budgetary challenges. One such factor is the reduction in disproportionate share hospital payment allotments that is set to go into effect this month. Federal law requires states to make these DSH payments to hospitals that serve a higher percentage of Medicaid-covered and uninsured patients. The federal government provides an allotment for each state, and, barring an act of Congress, those funds are set to be reduced to account for the presumed reduction in uncompensated care as a result of the ACA.

The future of the Children’s Health Insurance Program is the second point of uncertainty at the state level. As Route Fifty has previously reported, the outcome of Congressional CHIP reauthorization negotiations will have serious ramifications for state budgets across the country.