States' Medicaid Spending Growing

Medicaid expenditure growth is an important factor in states’ decisions on Medicaid eligibility expansion in 2014. On average, state Medicaid expenditures grew 20.4 percent between 2007 and 2011. Regional growth rates, however, varied greatly: the West region growth was almost twice as high as the national rate at 41.7 percent; the South rate was just 8.4 percent, and the Midwest and East were slightly less than the national average. The brief series provides regional and state Medicaid growth rates on two different measures: Medicaid expenditures, adjusted for inflation, 2007-2011 and Medicaid expenditures as a percent of total state expenditures.   

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National Analysis:

States face a huge decision before 2014. In its June 2012 decision on the Affordable Care Act, the U.S. Supreme Court placed in states’ hands the decision whether to expand eligibility for Medicaid to 133 percent of the federal poverty level. Currently, states provide Medicaid coverage to some adults with eligible children setting state eligibility at various percentages less than the federal poverty level.

Non-disabled adults without children are not eligible for Medicaid, under current rules. If states decide to expand Medicaid to previously uncovered low-income individuals, the law’s matching provisions provide 100 percent federal funding for the first three years. The federal funding gradually decreases through 2020, when the federal match reaches 90 percent. The 90 percent matching provision is more favorable to states than current Medicaid or Children’s Health Insurance Program, or CHIP, match rates.
 
Data show that Medicaid expenditures have grown between 2007 and 2011. Medicaid expenditures by states, as a percentage of overall budget expenditures, also have grown during that time. Medicaid’s share of the state budget pie now exceeds that of primary and secondary education, the traditional number one budget priority for states.1 As state policymakers grapple with the decision regarding Medicaid eligibility expansion, they must consider whether increased Medicaid obligations will displace other budget priorities and whether states can sustain Medicaid budget growth, even with the favorable match rate for the expansion population.
 
Medicaid Expenditures Grew in the States from 2007 to 2011.
  • Nationally, state Medicaid expenditures grew 20.4 percent between 2007 and 2011.
  • Regionally, Medicaid expenditures grew twice as much in the Western states as the national average, with a 41.7 percent increase in the four-year period. The growth in the West region without California is 30 percent, still considerably higher than the national average.
  • Medicaid spending increases in the Midwest and East were slightly less than the national average, at 17.4 and 16.5 percent respectively. The Southern states posted just an 8.4 percent expenditure increase over the four-year period.
  • Growth in expenditures for Medicaid reflects increased enrollment driven by unemployment during and following the Great Recession.
  • Like overall health care spending, the average annual increase in Medicaid spending has moderated in recent years and, in fact, the average annual growth in Medicaid spending lags behind the growth in all health care spending.2
  • The federal stimulus package provided an enhanced federal Medicaid matching rate to states between 2008 and 2011; that enhanced match rate relieved some of the burden on states to provide increased general funds to Medicaid. This obligation, however, came roaring back to states in July 2011 when the enhanced federal Medicaid matching rates were discontinued.3

State Medicaid Expenditures Grew as a Percent of Total State Expenditures.
  • According to National Association of State Budget Officers (NASBO) state expenditure data, the share of total state budgets spent on Medicaid has increased from an average of 20.9 percent in 2007 to 23.6 in 2011, a 2.7 percentage point increase.
  • NASBO data also show that every region experienced growth in the proportion of state budget expenditures for Medicaid between 2007 and 2011.
  • The West experienced the greatest growth, a 4.1 percentage point increase, while the South had the smallest growth at 0.5 percentage point.
  • The percentage point increases in the East and Midwest were more similar to the national rate, at 2.1 for the East and 1.4 for the Midwest.
  • In its "2010 State Expenditure Report," NASBO reported Medicaid represented the largest share of state budgets in the 2010 fiscal year due to increased Medicaid enrollment and spending resulting from the economic decline. Medicaid displaced elementary and secondary education as the largest component, a place it had held since the 2009 fiscal year.
  • In the 2011 fiscal year, NASBO found that Medicaid continued to grow as a percentage of total state expenditures, representing 23.6 percent, while K-12 declined to 20.1 percent.

References:
 
1 National Association of State Budget Officers. "State Expenditures Report: Examining Fiscal 2009-2011 State Spending." 
2 The Council of State Governments. “National Analysis: Medicaid Spending.” January 2012. 
3 Miller, Debra. “States Face Medicaid Match Loss After Recovery Act Expires.” The Book of the States 2011. The Council of State Governments. 

 

States' Medicaid Spending Growing