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Medicaid Spending Soars — Mostly In Expansion States

Medicaid spending soared nearly 14 percent last year—its biggest annual increase in at least two decades—as a result of millions of newly eligible low-income enrollees signing up under the Affordable Care Act, according to a report released Thursday by the Kaiser Family Foundation.

Total spending was highest in the 29 states that expanded Medicaid, the government insurance program for low-income and disabled people, under the health law. In those states, total Medicaid spending jumped nearly 18 percent in the fiscal year that for most states ended June 30, the Kaiser researchers found. (KHN is an editorially independent program of the foundation).

In the other states that did not expand -- Florida is one of them -- Medicaid spending rose about 6 percent, the report found.

The health law gave states the option to extend Medicaid coverage to everyone with incomes up to 138 percent of the federal poverty level, or $16,242 for an individual. In most Republican-controlled states lawmakers refused to expand, citing fears that the cost to their states would ultimately be too high. Some also said they were philosophically against offering coverage to “able-bodied” adults.

Nonetheless some Republican-led states are moving forward with expansion. Montana plans to expand Medicaid next year—becoming the 30th state. Its plan is pending federal approval.

Medicaid is financed by states and the federal government. The federal share ranges from 50 percent to 74 percent, depending on a state’s per capita income. Under the health law, the federal government pays the full cost of those newly eligible enrollees through 2016, then states gradually have to pick up some of the cost but no more than 10 percent.

Most of the growth in Medicaid enrollment has been from people who became eligible under the health law and therefore totally paid for by the federal government. States that expanded the program saw their share of costs increase by 3.4 percent compared to nearly 7 percent in states that did not expand. Much of the growth in the non-expansion states was from increased enrollment among previously eligible parents and children.

Before last fiscal year, the highest spending hike in Medicaid was in 2002 when total costs soared nearly 13 percent, the report found. In that year, enrollment rose more than 9 percent after the economy tanked following the Sept. 11, 2001 terrorist attack.

Nationally, enrollment in Medicaid rose nearly 14 percent last year – including 18 percent on average in expansion states and about 5 percent in non-expansion states. States that did not expand eligibility still saw growth in enrollment because new online health insurance exchanges have helped find people who were previously eligible but not enrolled.

Despite the surge in enrollment, state Medicaid officials from Arizona, Colorado and Florida said they have seen no major problems with Medicaid enrollees getting access to health care.

“In Colorado, access to care has been adequate,” Colorado Medicaid Director Gretchen Hammer said at a KFF briefing. In Florida, Medicaid Director Justin Senior said he has heard a “low level of complaints” from beneficiaries about getting appointments with providers.

Florida, like most states, has turned over most of its Medicaid operations to private managed care firms that get paid a set monthly fee to care for enrollees. Critics have said the plans often make it harder for recipients to get care, but state officials say the plans help control spending and that the insurers are held accountable for providing good care.

Nationwide, more than 70 million Americans are enrolled in Medicaid, according to the latest federal estimates. About half of those enrolled are children.

The Kaiser report found states are becoming more active in changing how health care is delivered and paid for, and getting more involved in reducing smoking and improving healthy behaviors.

“This is a new era for Medicaid,” said Diane Rowland, KFF’s executive vice president and the executive director of the Kaiser Commission on Medicaid and the Uninsured. “There is more of a focus on public health. The old Medicaid program was seen as a bill payer. It is a much different program today and driving changes in the overall health care delivery system.”