The cost of Medicaid continues to rise as state and local governments continue to experience fiscal problems. This article discusses some of the potential risk factors for rising Medicaid costs and some proposed solutions for addressing them.
State and local fiscal conditions remain constrained as revenues have yet to return to 2008 levels. Compounding this problem is the fact that Medicaid costs keep growing at unsustainable rates, partly because of high unemployment rates and the increased demand for Medicaid services as individuals lose employer-based health insurance.
Recently an expert panel discussed potential short-run and long-run tactics to manage the rising costs of Medicaid. Including:
- Howard Dean, 79th Governor of Vermont
- Nina Owcharenko, Director of the Center of Health Policy Studies, Heritage Foundation
- Robert Reischauer, President, Urban Institute
- Michael Rounds, 31st Governor of South Dakota
Among the biggest risk factors for Medicaid costs are:
- Slow economic growth: More people returning to work means a larger of share of health care picked up by the private sector. Unfortunately, job growth has been slow, driving more Americans to seek coverage under Medicaid;
- The “Medicaid cliff”: The American Recovery and Reinvestment Act (ARRA) of 2009 provided funding for states to cover more individuals under Medicaid due to the severe recession. The funding is set to expire on June 30, 2011, while unemployment remains high.
- Implementation of the Affordable Care Act: In 2014 the ACA will increase the Medicaid eligibility to 138 percent of poverty. One unknown factor is how many of those who become eligible for the expanded coverage under Medicaid will enroll. If many do, it could become extremely expensive for state and local governments.
- Federal deficit reduction: As the federal government seeks to reduce the deficit, a shift of Medicaid costs to states is possible.
The panel agreed that the problem is not with Medicaid specifically, but rather with the provision of health care in general. Ultimately what is necessary is a full economic recovery that puts people back to work and allows the private sector to pick up more of the costs associated with health care. A Congressional proposal calls for putting Medicaid on a budget and
funding it with block grants to states (with states responsible for covering the rest). A
September 2010 survey conducted by the Kaiser Family Foundation found that states are looking into othe cost cutting mechanisms such as benefit reductions, increased taxes on providers, and streamlining the eligibility and enrollment process.