State Spending on Medicaid

Medicaid, the largest health insurance program in the United States and the primary safety-net insurer for many of the most vulnerable Americans, turns 50 on July 30. This milestone comes amid the biggest change in Medicaid since its inception because of the implementation of the Affordable Care Act (ACA). 

Last summer, the State Health Care Spending Project, a collaboration between The Pew Charitable Trusts and the John D. and Catherine T. MacArthur Foundation, released a report looking at the fiscal impact of Medicaid on the states, including an analysis of cost trends and enrollment.

The following four graphics illustrate some of those trends.

1.  Medicaid Spending per Person Grew Slower Than That of the Nation’s Overall Spending on Health Care

On a per-enrollee basis, Medicaid spending remained relatively stable over the past decade, rising by only 5 percent after adjusting for inflation, from $5,956 in 2000 to $6,254 in 2010. This is substantially less than the overall health care spending per resident in the United States, which increased by 39 percent over the same period to just over $8,700 per resident. While spending in Medicaid is subject to many of the same cost drivers as is overall health care, its costs are moderated by several factors, including low provider-reimbursement rates. Medicaid pays providers significantly less than what they receive from private payers. Low reimbursement rates decrease the willingness of some providers to treat Medicaid participants, which can limit enrollees’ access to health care services.

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2.  Since 2000, Public Insurance Coverage and Uninsured Rates Have Increased, While Employer-Sponsored Insurance Coverage Has Dropped

The proportion of Americans covered by employer-sponsored health insurance decreased between 2000 and 2012, with declines particularly pronounced during economic downturns. In contrast, enrollment in Medicaid and Medicare grew during this same period, as did the percentage of uninsured Americans. More specifically, Medicaid enrollment increased 50 percent over the past decade. This growth is one of the major drivers of the program’s increased costs.

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3.  A Small Portion of Medicaid Enrollees Accounts for the Majority of Spending

In practice, Medicaid functions as two separate insurance programs for low-income individuals: one for children and parents and the other for elderly and disabled individuals of all ages. Across all of the states, elderly and disabled individuals made up only 24 percent of all Medicaid enrollees in 2010, but they accounted for approximately 64 percent of spending on benefits because they are more likely to have complex health care needs that require costly acute and long-term care services. As a result of their high cost per capita, the proportion of a state’s Medicaid beneficiaries who are elderly and disabled is a major driver of Medicaid spending. On average, Medicaid spends over five times more on these enrollees than on parents and children with Medicaid coverage.

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4.   49 States Spent More of Their Own Funds on Medicaid

Earlier this year, Pew’s Fiscal 50 project analyzed how much of their own funds states spend on Medicaid. In fiscal 2013, that share was higher when compared with fiscal 2000 in all but one state (North Dakota). In the other 49 states, Medicaid spending grew by a bigger percentage than did state-generated revenue. Overall and in 15 states, 2013 state Medicaid spending was at its highest level since at least 2000 as a share of revenue. This spending accounted for 16.9 percent of states’ own funds, or nearly 17 cents of each dollar—4.7 cents more than in 2000.

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Maria Schiff leads Pew’s research on states’ health care spending.