Medicaid Enrollment and Spending Expected to Grow in Fiscal 2011 (US)

October 8, 2010

In a survey of Medicaid officials, states reported an average increase in Medicaid spending of 8.8 percent across all states in fiscal year 2010, the highest rate of growth in eight years and well above their original projections of 6.3 percent growth. Medicaid directors attributed the unexpected jump to higher-than-expected increases in eligible families due to the recession, which pushed the national unemployment rate above 10 percent and even higher rates in some states.

The Kaiser Commission on Medicaid and the Uninsured provided the information Sept. 30 at a briefing on state Medicaid programs, the recession and health reform. Researchers at the Kaiser Family Foundation and Health Management Associates authored the report.

For fiscal year 2011 (which runs through June 2011), states budgeted for an average 7.4 percent increase in spending above fiscal year 2010 — a slightly slower rate of growth consistent with their expectations that enrollment growth will slow to 6.1 percent, according to the survey.

The report said that the American Recovery and Reinvestment Act of 2009 (ARRA) provided a temporary boost in the federal government’s share of Medicaid costs, providing an estimated $87 billion to states starting in October 2008. ARRA’s increased federal Medicaid support was originally scheduled to end in December 2010, but in August, Congress enacted additional relief for states through June 2011, providing $16 billion over six months.

Looking forward, states are hoping that the economy starts to improve as they plan to implement health reform legislation, the report stated. Despite the tough economy, Medicaid directors reported that they were able to maintain the program’s core mission and objectives and achieve some program improvements.

However, in the near future, even if the economy begins to improve at the national level, the impact of the recession for states will persist for several years, the report said. In fiscal year 2012, the state share of Medicaid spending will increase dramatically (by as much as 25 percent or more) due to the expiration of the enhanced federal Medicaid matching program on June 30, 2011, while state revenues are almost certain to remain below pre-recession levels.

In addition to the effects of the economic downturn, Medicaid directors see preparing for the implementation of health reform as a huge opportunity as well as the next major challenge. Survey respondents said health reform will dramatically reduce the number of uninsured and provide access to new federal funding associated with expanded Medicaid coverage, but it will not be easy to implement. In many states, new leadership and staff will take over the responsibilities of planning for and implementing health reform after the 2010 elections.

The report authors concluded that, even in the face of significant challenges, Medicaid remains the foundation of coverage for low-income Americans as well as a critical safety net in today’s health care system, and the program will fulfill an even larger role under health reform.