Medicaid Enrollment and Spending, 2009 to 2011

Medicaid enrollment continued to grow in the 2011 fiscal year, largely due to the nation's continuing economic problems.  However, it grew at a lower rate than in 2009 and 2010.  Combined federal and state Medicaid spending also grew in fiscal year 2011 at noticeably higher rates than in 2009 and 2010.  Enhanced federal Medicaid match rates under the American Recovery and Reinvestment Act provided some relief to states in the face of Medicaid-related budget pressures.  

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Medicaid enrollment continued to grow in the 2011 fiscal year, largely due to the nation’s continuing economic problems, although at a lower rate than in 2009 and 2010. Combined federal and state Medicaid spending also grew in the 2011 fiscal year at noticeably higher rates than in 2009 and 2010. The recession and historically high unemployment caused the rising Medicaid enrollment and, in turn, drove rising expenditures. Enhanced federal Medicaid match rates under the American Recovery and Reinvestment Act, however, provided some relief to states in the face of Medicaid budget pressures. 

From 2009 to 2011, Medicaid enrollment grew on a yearly basis, although at a declining rate.

  • In the 2009 fiscal year, the Medicaid enrollment growth rate topped out at 7.8 percent.1
  • The enrollment growth rate slowed to 7.2 percent in 2010. In 2011, enrollment growth continued to decline, falling to 5.5 percent. The three-year average enrollment growth rate was 6.8 percent.2
Medicaid also experienced yearly increases in expenditures from 2009 to 2011.
  • The annual growth in Medicaid spending reached 7.6 percent in the 2009 fiscal year, the highest in four years.3
  • In a CSG analysis of Medicaid spending, only 10 states allocated more state general funds to Medicaid from 2007 to 2011, even while overall Medicaid expenditures grew for all but three states. In other words, states’ Medicaid expenditures continued to grow in all but three states between 2007 and 2011 without increased investment from states’ general funds due to the enhanced federal match under ARRA.4
  • In 2010, expenditure growth slowed to 6 percent but increased again in 2011, reaching 10.1 percent. The three-year average spending growth rate was 8 percent.5
Certain segments of state Medicaid programs experienced drastically larger expenditure increases than others.
  • In the 2009 and 2010 fiscal years, Medicaid managed care expenditures grew 14.8 percent and 12.5 percent, respectively.
  • The Medicaid Prescription Drug Rebates program spending also grew drastically in 2009 and 2010, at rates of 15.8 percent and 17.9 percent, respectively.6
Compared to certain benchmarks, Medicaid spending performed better than others from 2007 to 2010.
  • From 2007 to 2010, average annual Medicaid spending growth per enrollee was 2.5 percent. This is favorable compared to national health expenditures per capita which grew 3.3 percent. Additionally, spending for private health insurance per enrollee grew 5.5 percent annually from 2007 to 2010.7
The primary cause of the increasing rates of Medicaid enrollment and spending was the economic recession. Medicaid enrollment is influenced by economic conditions; more specifically, it is counter-cyclical. As the economy worsens, Medicaid enrollment, and thus spending, typically increase.
  • The unemployment rate drastically increased during this period. In June 2008, the unemployment rate was 5.6 percent. Unemployment increased almost every month until October 2009 when it peaked at 10 percent. By June 2011, the unemployment rate incrementally improved to 9.1 percent.8 As millions of people lost their jobs, the majority lost their employer-sponsored health insurance. Many in this group became eligible for Medicaid, increasing enrollment and spending accordingly.
  • Both the Kaiser Family Foundation and the Urban Institute cite increasing income inequality as a significant contributing factor to the growing low-income population.9,10
  • In an attempt to control Medicaid expenditures, 47 states in 2011 and all 50 states in 2012 implemented cost-containment measures.11 For many states, these strategies mean program restrictions, including provider reimbursement cuts, eligibility restrictions, benefits reductions  and increased cost sharing. Some states adopted system reform approaches to contain spending, such as expanding managed care and increased funding for community-based long-term care.
Based on projections for the 2012 fiscal year, Medicaid enrollment and spending will continue to grow, although at noticeably slower rates than in previous years.
  • Enrollment is expected to increase 4.1 percent in 2012, while spending is expected to grow 2.2 percent.12

References:

2 Ibid.
3 National Association of State Budget Officers. "2009 State Expenditure Report." December 2010. 
4 Miller, Debra. "Medicaid Spending: States Face Budget Dilemma After ARRA Bailout." The Book of the States, 2012. Council of State Governments. 
5 National Association of State Budget Officers. "2010 State Expenditure Report." December 2011. 2011 figures based on estimated budgets.
6 Garfield, Rachel, et al. "Enrollment-Driven Expenditure Growth: Medicaid Spending during the Economic Downturn, FFY2007-2010." The Henry J. Kaiser Family Foundation. May 2012. 
7 Ibid.
8 United States Department of Labor. "Labor Force Statistics from the Current Population Survey." May 2012.
9 Garfield et al.
10 Urban Institute Health Policy Center. "Medicaid."
11Smith et al.
12 Ibid.