States See Higher Medicaid Enrollment as Economic Downturn Persists, Study Finds

Medicaid spending by states increased nationwide by 5.3% in fiscal year 2008 and enrollment increased by 2.1% largely because of the continuing economic downturn, according to an annual survey released on Monday by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured, Stateline.org reports. For the study, Kaiser researchers with KCMU and Health Management Associates surveyed the Medicaid directors of all 50 states between July 1, 2007, and June 30, 2008 (Vu, Stateline.org, 9/30). The survey found that in FY 2009, Medicaid enrollment is projected to increase by 3.5% and state spending is projected to increase by 5.8% (Reichard, CQ HealthBeat, 9/29). More than two-thirds of state Medicaid directors said there is an even chance they will experience a budget shortfall in FY 2009 (CongressDaily, 9/29).

Vern Smith, former director of Michigan's Medicaid program and a principle with HMA, said, "Just when it looked like things would get better, a new economic downturn has pulled the fiscal rug out from under the states." He added that most states are restoring cuts made in previous years and increasing provider payments, but three states have reduced benefits this year because of unexpected budget shortfalls.

Nevada and New York state in August reduced Medicaid payments to hospitals and nursing homes, and South Carolina this month announced cuts to physician and dentist payments. Smith said, "As state fiscal situations worsen, actions in these three states may be a harbinger of things to come" (Stateline.org, 9/30). According to Smith, "If the downturn is prolonged, and it contributes to large increases in Medicaid enrollment and spending, then [states] will have to look at options to rein in spending" (Anstett, Detroit Free Press, 9/30).

According to a separate previously-released analysis, a 1% increase in unemployment translates to an increase of one million in Medicaid and SCHIP enrollment, an increase of $3.4 billion in combined state and federal Medicaid spending, and an increase of 1.1 million in the uninsured population because many people who lose employer-sponsored coverage do not qualify for Medicaid.

The report on the survey noted that much of the data collection was conducted at the beginning of 2008, when the economy was stronger, allowing states to implement a variety of Medicaid improvements and expansions. Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of KCMU, said the survey likely understates the eventual effect on Medicaid of the poor economy. She said, "I think we have a somewhat rosier picture (in the survey) than the reality we've heard from the directors on the ground" (CQ HealthBeat, 9/29).

The survey is available online.

AHIP Report
In related news, America's Health Insurance Plans released a report on Monday that found Medicaid spending for long-term care will total $3.7 trillion in the next 20 years, Reuters reports. State programs will spend $1.6 trillion on long-term care while the federal government will spend $2.1 trillion during that period. According to the report, if current trends continue, annual Medicaid spending for long-term care would grow from $51.5 billion in 2008 to $115.6 billion in 2027. In addition, the number of states spending more than $1 billion on long-term care would increase from 15 to 25 (Dunham, Reuters, 9/29).

The AHIP report is available online (.pdf).