Medicaid Spending Increased By 10.7%

Armen Hareyan's picture

Medicaid Spending

Medicaid spending increased by 10.7% in the first six months of 2007-- the largest increase since 2001 -- and likely will reach $330billion this year, according to a USA Today analysis of data from the Bureau of Economic Analysis. USA Today attributed the increased Medicaid spending in part to:

  • Efforts by states to extend health insurance to more residents through Medicaid and SCHIP;
  • Increasedenrollment in Medicaid after a temporary decrease in 2006 that resultedfrom implementation of new proof-of-citizenship rules; and
  • Increased Medicaid reimbursements for health care providers.

Robert Campbell, vice chair of the accounting and consulting company Deloitte & Touche,said that, as a result of the increased Medicaid spending, states "aregoing to have to make some tough decisions on who receives care, whatcare they get and what the limitations are." In addition, he said thatMedicaid spending likely will continue to increase as states seek toextend health insurance to more residents and health care costscontinue to increase.


According to USA Today, the"Medicaid spending burst may signal the end of a two-year period whencosts seemed to be coming under control." Medicaid spending increasedby 5.1% in 2005 and decreased by 1.7% in 2006. Medicaid spending "felllast year because a variety of cost controls -- such as moving patientsfrom nursing homes to lower-cost home health care -- producedunexpectedly large savings" and because "Medicaid shifted some costsinto the new Medicare prescription drug benefit," USA Today reports (Cauchon, USA Today, 10/8).

State Grants

In related news, HHSlast week announced that 16 states and Puerto Rico have received almost$52 million in Medicaid "transformation" grants to study and developrevisions to their programs, CQ HealthBeatreports. Congress approved $150 million for the grants, which HHS willdistribute in 2007 and 2008, as part of the 2005 Deficit Reduction Act,which President Bush signed into law in 2006. In January, 26 statesreceived $98 million in grants, HHS said.

HHS SecretaryMichael Leavitt said, "These transformation grants express the coregoal of this administration to give states the kind of flexibility theyneed to deliver high quality care in an efficient and more economicalway" (CQ HealthBeat, 10/5).

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