States' share of Medicaid spending rises

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By KEVIN FREKING, AP, 10 Oct 2006

WASHINGTON - States are finally getting relief when it comes to providing health care for the poor. The states' share of Medicaid spending rose by an average of just 2.8 percent in fiscal year 2006, the lowest rate in a decade. Meanwhile, state revenues increased at a 3.7 percent clip.

That's good news for patients, who could see more services covered, and for health care providers, who could conceivably get a raise, according to officials from the Kaiser Family Foundation.

"States reinvest in good times and they trim back in hard times," said Diane Rowland, the foundation's executive vice president. "As we see the return of good times, we'll see some states reinvesting."

Kaiser reported Tuesday that the slower growth in Medicaid comes primarily from an improved economy and tighter cost controls enacted by the states. It was the first time since 1998 that revenue grew faster than Medicaid spending. The federal government covers about 60 percent of the program's overall costs, which exceeded $300 billion in the fiscal year ending June 30.

In recent years, states often froze or trimmed reimbursement rates for doctors, pharmacists and other health care providers. They also restricted benefits for certain patients. For example, stricter income restrictions forced thousands of adults to lose their Medicaid coverage in states such as Tennessee and Missouri.

Looking forward to next year, only five states plan to further restrict eligibility for Medicaid. Twenty-six plan to restore cuts from previous years or expand health care to new populations, Kaiser officials said.

The foundation is a heath research organization that annually reports on changes taking place within Medicaid.

Medicaid now consumes about 18 percent of state budgets. The program serves as a safety net that gives the poor access to health care.

Enrollment in Medicaid soared in 2002 and 2003. But that's just when state revenues were plummeting. For example, in 2002, revenues declined 7.8 percent, but Medicaid spending grew 12.4 percent.

The resulting pressure on state budgets forced many states to also cut back on education, law enforcement and other programs to maintain a balanced budget.

Nearly 55 million people get health care or nursing home care through the Medicaid program. In 2006, enrollment in the program grew only 1.6 percent. The improved economy meant not as many people were eligible for the program.

The Kaiser report notes that the new Medicare drug benefit also helped states save money. Prescription drug coverage for about 6.2 million of the poorest beneficiaries became a responsibility of the federal government through the new benefit. States continue to finance a portion of the drug coverage.

About 4 percent of beneficiaries account for nearly half the program's costs, according to Kaiser. Many of those beneficiaries live in institutions.

State officials are trying to control costs for those patients by improving the care they get at home. Thirty-eight states reported plans to expand programs that allow people to hire family members, friends, or neighbors to provide care at home. This allows consumers to get help with activities like bathing and dressing from people with whom they are comfortable.

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