States Report Sharp Increase in Medicaid Enrollment and Spending Amid Worst Recession in Decades
Kaiser Family Foundation 09.30.09

WASHINGTON, D.C. The number of people on Medicaid and state spending on the program are climbing sharply as a result of the recession, straining state budgets and pressuring officials to curb costs despite increased financial help from the federal government, according to a survey released today by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured.

The annual 50-state survey of state Medicaid officials finds that these trends are expected to continue well into the 2010 fiscal year, with the slumping economy contributing to the loss of jobs, private health coverage and state tax revenue at a time when more people are seeking help from public programs.

Across the country, states estimate Medicaid enrollment grew by an average of 5.4 percent in state fiscal 2009, the highest rate in six years, surpassing the projected 3.6 percent increase at the start of the year. Similarly, total Medicaid spending growth averaged 7.9 percent in FY 2009, the highest rate in five years, well above the 5.8 percent projected growth. For FY 2010, states estimate Medicaid enrollment will grow by 6.6 percent over FY 2009 levels.

The survey finds that, based on initial legislative appropriations, Medicaid spending across states is expected to grow by an average of at least 6.3 percent in fiscal 2010. But officials in three-fourths of the states are concerned that those appropriations will not be enough, leading to more budget shortfalls and more pressures to trim services and spending.

“The recession has shown the importance of Medicaid as a safety net for millions of Americans who have lost health coverage when they have lost their jobs,” said Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of the Kaiser Commission on Medicaid and the Uninsured. “But it also has shown the challenges for states of maintaining coverage when state revenues drop during times of economic crisis.”

American Recovery and Reinvestment Act (ARRA) Provides Some Fiscal Relief

The fiscal picture would have been much worse if not for the availability of increased federal Medicaid funding through the American Recovery and Reinvestment Act (ARRA).

The federal money, which will provide an estimated $87 billion to states through enhanced federal matching funds through December 31, 2010, helped all states, many of which are facing significant state budget shortfalls. States used the funds to address overall budget and Medicaid budget shortfalls, avoid cuts to providers, benefits and eligibility and address the recession-driven growth in enrollment.

ARRA also helped protect Medicaid eligibility. In order to qualify for the money, states had to ensure that their Medicaid eligibility standards, methodologies and procedures were no more restrictive than they had been on July 1, 2008, seven months before the enactment of the stimulus law. That requirement prompted 14 states to reverse new eligibility restrictions and five states to abandon planned new restrictions.

Nearly Every State Implemented Measures To Control Medicaid Spending

Even with federal relief, nearly every state implemented at least one new Medicaid policy to control spending in fiscal 2009 and 2010, the survey finds.

More than any other policy area, provider payment rate changes serve as a barometer of state fiscal conditions. Thirty-three states cut or froze provider rates in fiscal 2009, well above the 22 that had been expected to do so. Even more states (39) are slated to cut or freeze rates for FY 2010. And several others are considering it.

Rate cuts can jeopardize provider participation and inhibit Medicaid enrollees’ access to needed care. They bite particularly hard because some states have not fully restored provider rates to levels seen before the round of cuts in the last economic downturn from 2001 to 2004.

Several states also cut covered benefits or imposed new utilization controls for existing benefits, most commonly targeting dental and vision services for adults. Ten states reported benefits restrictions for fiscal 2009 and 15 reported them for fiscal 2010. California, Michigan and Utah instituted multiple benefit cuts.

Pressures Illustrate Challenges And Opportunities For Medicaid As A Cornerstone Of Health Reform.

The reliance on Medicaid during times of economic crisis, and the fiscal pressures that follow, spotlight both the challenges and opportunities for the program in health reform efforts. Several legislative proposals in Congress include measures that would expand Medicaid to cover more low-income people as a platform for larger reform.

Because many states have already used Medicaid as a vehicle to expand health coverage, Medicaid officials expressed general support for an expanded role for the program in health reform. Even in these tight fiscal times over half of the states in FY 2009 and FY 2010 are moving forward with efforts to improve eligibility standards or the streamline application processes in a bid to cover more people. Among the states implementing the broadest reforms and eligibility expansions are Colorado, Maryland, New York, Oklahoma and Wisconsin.

However, state Medicaid officials did register concerns about health reform, too, reflecting current state budget situations. Three-quarters of states expressed concern that Medicaid eligibility expansions, mandated minimum provider rates and new administrative costs depending on how they were financed -- could add to state fiscal woes.

Today’s report, The Crunch Continues: An Update on Medicaid Spending, Coverage and Policy in the Midst of a Recession Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2009 and 2010, is available online at http://www.kff.org/medicaid/7985.cfm. In addition, an audio press briefing on the release will be available after 6 p.m. ET today.

For additional information, please contact:

Chris Lee at clee@kff.org or (202) 347-5270
Craig Palosky at cpalosky@kff.org or (202) 347-5270

The Kaiser Family Foundation is a non-profit private operating foundation, based in Menlo Park, California, dedicated to producing and communicating the best possible information, research and analysis on health issues.

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, D.C. 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.