Medicaid Spend Grows 2.9% in FY 2019, Medicaid Enrollment Flat

October 22, 2019 - Overall Medicaid spending growth was at 2.9 percent for fiscal year (FY) 2019 but is projected to trend upward in the new year, while Medicaid enrollment growth was flat and will continue to be so in FY 2020, according to a Kaiser Family Foundation 50-state Medicaid budget survey.

“States generally attributed enrollment declines to a stronger economy; however, some states also pointed to process and systems changes including changes to renewal processes, upgraded eligibility systems and enhanced data matching efforts to verify eligibility as putting a downward pressure on enrollment,” the study stated.

But a strong economy and system changes will not be enough to fend off rising prescription drug costs, increasing provider rates, and a growing older generation with high long-term care costs, the survey indicated. While states have been trying to control these costs with methods such as alternative payment models, these drivers are expected to heighten Medicaid spending in FY 2020.

The survey found that in FY 2019, rather than relying solely on general revenue, some states were using savings from Medicaid expansions as well as revenue from provider taxes to cover states’ expansion costs. In total, 11 states used provider taxes—either ones already in place or ones they created for this purpose—to pay for their Medicaid expansion. Seven states said that expansion-related health programs helped fuel further expansion.

States have also been trying to contain costs by identifying high cost beneficiaries and implementing a care management approach.

State Medicaid programs’ contribution to overall Medicaid spending saw little change from FY 2018 to FY 2019. In FY 2019, states’ Medicaid spending growth rose by only 1.1 percent from the previous year. In FY 2018, states contributed 37.5 percent to Medicaid’s overall spending.

In comparison, experts’ expectations for FY 2020 indicate a more significant shift. They anticipate a 5.7 percent increase in states’ Medicaid spending growth.

Medicaid spending in FY 2018 and FY 2019 contradicted normal trends. In FY 2018, state Medicaid spending outpaced overall Medicaid spending by 1.3 percentage points. And in FY 2019, the state Medicaid spending dropped 1.8 percentage points below overall Medicaid spending.

The researchers attribute the spending shifts, in part, to certain policy changes that have been influencing Medicaid spending for over a decade.

The survey analysis charted out the effects of the American Recovery and Reinvestment Act (ARRA) and the Medical Assistance percentage (FMAP) and its role in bringing about the status quo.

The ARRA enhanced the federal government’s matching rate until FY 2011. When it expired, Medicaid spending experienced a significant schism, with overall spending dropping to under zero percent while state spending shot up to nearly 20 percent.

Since the Affordable Care Act went into effect and the government has been gradually backing down from 100 percent matched spending, Medicaid spending returned to its default position, in which state Medicaid spending budgets shadow the overall Medicaid spending budget. The past two years have defied that trend.

This is in part because in FY 2018 states had to take on a five percent share of Medicaid expansion costs.

Next year, states will start paying for 10 percent of the Medicaid expansion group’s costs. States project that in FY 2020 and subsequent years, with the states’ contributions to Medicaid expansion groups stabilized, state Medicaid spending will remain below overall Medicaid spending.

“Average state spending growth may be slower than total spending in FY 2019 and FY 2020 because of the marginally smaller increases in the state share of expansion costs,” the researchers conjectured. “However, our survey data do not provide an explanation.”

Apart from spending data, the survey also noted that enrollment declines in FY 2019 were highest for children, continuing a trend which saw a 2.2 percent decrease in FY 2018 as well. The elderly and persons with disabilities constituted the group with highest enrollment.

Overall, 11 states saw an enrollment increase in FY 2019. Thirty-one are preparing for enrollment growth in FY 2020.

“A strong economy and lower Medicaid enrollment growth relieve some fiscal pressure on states, but a future economic downturn as well as the outcomes of the elections could have significant implications for the Medicaid program, state budgets, and for Medicaid enrollees,” the researchers warned in closing.