Special Report on Medicaid: Bridging the Gap Between Care and Cost

  • January 05, 2006
The following is an excerpt from the executive summary of Special Report on Medicaid: Bridging the Gap Between Care and Cost:

“Medicaid officials celebrated the program's 40th anniversary in July, although the occasion didn't feel much like a birthday party. With the federal government drowning in debt and states just emerging from a service-choking recession, the program is at the center of a national debate over how to cut costs while maintaining the safety net for roughly 58 million Americans, including the disabled, low-income children and their parents, pregnant women and seniors. As Drew Altman, president of the Kaiser Family Foundation, puts it, the Medicaid discussion is “about our beliefs about the role of government and our obligations to one another.”

Even though Medicaid growth rates have slowed in the past year or two—the economy has improved and states have taken some steps to control costs—Medicaid spending is now more than 21 percent of total state budgets, threatening to drain resources from other key state responsibilities. Overall, the price tag was $329 billion last year, of which the federal government paid 57 percent and the states the rest. Spending growth is likely to be 7.7 percent a year over the next decade, according to Congressional Budget Office estimates. “Medicaid,” Virginia Governor Mark Warner told the National Governors Association in July, “could actually bankrupt every state in the country before 2020 unless we can get a handle on it.”

That dire prediction will not come to pass. Dramatic changes in some states' Medicaid programs have already taken place, and more are inevitable in the near future. High-level commissions and study groups are pursuing broad-scale reform. At the federal level, Health and Human Services Secretary Michael O. Leavitt hand-picked 15 voting members for a commission charged with submitting a report with ideas for the future of the Medicaid program. It was also asked to carve $10 billion out of the Medicaid bill over the next five years and met that deadline in September with a recommendation of $11 billion in savings. It suggested such cost controls as new formulas for prescription drug reimbursement, tiered drug co-payments for Medicaid recipients and barriers to families who siphon off elderly relatives' assets in order to qualify them for Medicaid-reimbursed long-term care. Several months before, the National Governors Association issued a preliminary report recommending some of the same ideas plus a number of others. The NGA also called for more flexibility for state officials to balance the delivery of quality health care with the need to tame costs.

Despite those efforts, many state lawmakers, Medicaid officials, advocates and recipients remain deeply worried about the future of the nation's largest health care program, particularly because some of the cost-cutting proposals on the table threaten to do more harm than good. But the silver lining here is that a number of states are exploring new ways of doing business, developing better approaches to service delivery, creating a track record of success—and asking the federal government to support their innovations.

The articles that follow look at what is happening in state Medicaid programs in specific areas. They are the result of months of careful study by the Pew Center on the States, a new operating division of The Pew Charitable Trusts. This report affords an opportunity to analyze the real-world experiences of states, highlight examples of what works and what doesn't, and inform a crucial policy debate that will affect the lives of millions of Americans.”