Economic woes accelerate Medicaid spending

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Medicaid spending grew about one-third from 2000 to 2003 as job losses and other economic woes made more people eligible for the government-run health insurance program for the poor, according to a new study issued on Wednesday.

Costs rose from $205.7 billion in 2000 to $275.5 billion in 2003, researchers from the Urban Institute’s Health Policy Center report in the journal Health Affairs.

"Medicaid played its role as a safety net ... but the result was a sharp increase in program costs,” researchers John Holahan and Arunabh Ghosh write.

The joint federal-state healthcare program, which also covers many elderly nursing home patients, looks set to be a major source of controversy this year.

President Bush’s budget request, which will be sent to Congress on Feb. 7, is expected to seek spending caps for Medicaid or may turn the federal share into a block grant to states.

Health Secretary-designate Mike Leavitt told senators at a Jan. 19 confirmation hearing that he plans to seek changes in the program, which he called “not efficient.”

The Medicaid rolls swelled as more Americans lost their jobs, took pay cuts or lost health coverage. Rising prescription drug prices may have also driven more eligible patients to enroll in Medicaid to cover costs, Holahan said in an interview.

Drug coverage will shift next year from Medicaid to Medicare, the insurance program for the elderly, as part of the Medicare modernization law passed in 2003.

The researchers said the number of older and disabled Americans also grew as the population aged and life-saving technologies and medicines boosted lifespans. That growth “is likely to continue during most of the decade,” they add.

But the alternative to more Medicaid patients would be another financial burden—more uninsured Americans. “There would have been strong pressure on local hospitals and clinics to increase the amount of free care provided,” they write.

Despite state efforts to curb enrollment by limiting eligibility, higher spending “placed heavy burdens on state budgets and has contributed to the federal budget deficit,” the report found. Spending growth was spread evenly among nursing facility care, home care and prescription drugs.

The researchers analyzed data collected from all 50 states and Washington, D.C., through the Kaiser Commission on Medicaid and the Uninsured. They also used data collected from the Centers from Medicare and Medicaid Services and the Medicaid Statistical Information System, which is used to process patient claims.

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