States’ Projections for Medicaid Expansion Were Accurate

Medicaid spending and enrollment has increased in all states during fiscal years (FYs) 2014 and 2015 due to the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), according to a report from the Kaiser Family Foundation (KFF). Overall spending on Medicaid has increased 10.2 percent during FY 2014 with spending from state source increasing by 6.4 percent. These increases were in line with projections made by state Medicaid administrators. KFF projects that overall spending on Medicaid in FY 2015 will grow 14.3 percent. The higher rate of growth is due to the fact that FY 2105 will be the first full year of Medicaid expenditures since expansion occurred.

As would be expected, the majority of these increases occurred in the states that expanded Medicaid, but enrollment and spending also increased in states that did not choose to expand Medicaid eligibility to all adults with incomes below 133 percent of poverty. These findings are based on KFF’s 14th annual survey of Medicaid directors in all 50 states and the District of Columbia and conducted in conjunction with Health Management Associates. The findings of this study reflect earlier findings.

Medicaid Expansion

The ACA required states to expand eligibility to all individuals with incomes below 133 percent of poverty or lose all federal Medicaid funding. The Supreme Court in National Federation of Business v Sebelius found that this expansion radically changed the nature of Medicaid from a voluntary program providing states with funding to care for the poor and disabled to a program of limited universal coverage—and that those changes were unconstitutional. Following the Supreme Court’s decision states could decide to expand Medicaid or not. During 2014, 25 states and the District of Columbia choose to expand Medicaid and received 100 percent federal funding for the individuals enrolled under the expanded criterion. Those states will receive 100 percent funding for 2014, 2015 and 2016. In 2017 the federal funding will decrease to 95 percent. Funding will continue to decrease to 94 percent in 2018, to 93 percent in 2019, and to 90 percent in 2020 and beyond. During 2015, an additional two states expanded Medicaid eligibility and an additional two states are seeking CMS approval of a waiver to expand Medicaid coverage in their states.

Overall Spending

The average growth in spending on Medicaid was 10.2 percent in FY 2014. In the states that expanded Medicaid the increase in spending averaged 13.1 percent, and in states that did not expand Medicaid the average increase in growth was 5.6 percent. State legislatures did a good job of appropriating sufficient funds to cover this growth, KFF reported. State legislatures appropriated an additional 13.1 percent for Medicaid spending in states that expanded Medicaid, and state legislatures that did not expand Medicaid appropriated an additional 6.8 percent for Medicaid expenditures, which was more than the growth amount of 5.6 percent.

Enrollment Growth

Across the country Medicaid enrollment increased 8.3 percent in FY 2014 and is projected to increase 12.2 percent during FY 2015, KFF reported. Enrollment in states that expanded Medicaid grew by 12.2 percent, and in states that did not expand enrollment Medicaid enrollment increased 2.8 percent during FY 2014. In FY 2015 enrollment in states that have expanded Medicaid is projected to increase 18 percent and 5.2 percent in states that have not expanded Medicaid, according to KFF.

The increase in enrollment in states that did not expand Medicaid eligibility is attributed to individuals who were eligible for Medicaid prior to the ACA but who never applied. The reasoning is that due to increased media attention and outreach efforts these individuals now learned that they might be eligible for Medicaid, even though they were eligible all along. Medicaid directors have estimated that 20 percent of new enrollees were eligible prior to the ACA expansion of Medicaid eligibility, reported KFF.

KFF expects these trends to continue as additional states decide to expand Medicaid eligibility. KFF notes that Congress has increased the amount of federal funding to states for Medicaid during recessions and that this may occur again. Finally, the economy can also impact Medicaid funding, as legislatures have to make decisions based upon receipt of tax revenues. All of these factors could change the rates of change in Medicaid enrollment and spending.