Medicaid spending growth up as enrollment surge slows

National growth in Medicaid enrollment and total Medicaid spending slowed substantially in fiscal year (FY) 2016 and are projected to continue to slow, despite record increases in FY 2015. The decline occurs as the initial enrollment surge under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) coverage expansions tapers off and prices for high-cost and specialty drugs rise, according to the Kaiser Family Foundation’s annual 50-state Medicaid Budget Survey.

Medicaid spending on the rise

The survey projects an increase in state Medicaid spending growth in FY 2017 related to the requirement that Medicaid expansion states begin paying a five percent share of expansion costs on January 1, 2017. Before this date, the federal government committed to paying 100 percent of expansion costs. In expansion states, the median growth in Medicaid spending is estimated to be 5.9 percent in FY 2017, up from 1.9 percent in FY 2016. In non-expansion states, state Medicaid spending is projected to increase by 4 percent in FY 2017, compared to 3.9 percent in FY 2016. Thus, the differential in rates across expansion and non-expansion states is narrowing continually. As growth in overall state revenues slows or declines, pressure to control Medicaid spending increases.

Continued delivery system reforms 

The survey also found that the majority of states are refining their pharmacy programs to control costs and are adopting or expanding strategies to deal with the opioid crisis. States are increasing reliance on managed care, with at least 75 percent of Medicaid beneficiaries enrolled in risk-based managed care organizations (MCOs) in the majority of states that contract with MCOs. Additionally, 29 states are adopting or expanding delivery system reforms, such as patient-centered medical homes and accountable care organizations (ACOs). Nearly every state reported actions to expand the number of people served in community settings.