Report: Medicaid costs squeezing state budgets

Medicaid uses state and federal dollars to provide healthcare for low-income patients, and is administered by the states.

State spending on the program increased 20 percent in FY2012 after rising 23 percent in FY2011, the NGA report stated.

Authors attributed the sharp increases to declining incomes and job losses, leading to the loss of employer-based healthcare coverage. These developments came as federal aid to Medicaid under the stimulus bill expired, the report stated.

In response to the squeeze, states' tactics for reducing Medicaid expenditures have included "reducing provider payments, cutting prescription drug benefits, limiting benefits, reforming delivery systems, expanding managed care and enhancing program integrity efforts," according to the NGA's executive director, Dan Crippen.

The report estimated that by 2013, Medicaid enrollment will have risen 12.5 percent over three years, and that the recession's original surge — a 7.2-percent increase in enrollment between 2009 and 2010 — approached the peak enrollment increase during the last economic downturn in 2002 (9.5 percent).

Crippen warned in a statement that states alone cannot control rising Medicaid costs.

"With the growth of Medicaid expenditures, spending priorities will again face competition for state budget dollars this fiscal year," he said.

"States have undertaken numerous actions to contain Medicaid costs. ... These efforts alone, however, cannot stop the growth of Medicaid."

The National Association of State Budget Officers, which co-authored the report, cautioned that states are seeing low budget growth as Medicaid expenditures rise.

"Despite some improvement in state budgets since the depths of the recession, state budget growth is still significantly below average — growing at less than half the average growth of the past few decades,” said Scott Pattison, the group's executive director.

In response to the analysis, the American Health Care Association (AHCA) — the largest U.S. association of long-term and post-acute-care providers — called on lawmakers to use caution when considering cuts to Medicaid provider assessments.

"This national survey affirms what we’ve been hearing from our member executives across the country — state governments need help in managing their Medicaid budgets," said AHCA CEO Mark Parkinson, a former Kansas governor.

"I can’t think of a clearer sign to lawmakers in Washington that reducing Medicaid provider assessments is the wrong way to go during these uncertain times."