Medicaid Spending Growth Slows as U.S. Economy Improves

Spending on Medicaid, the U.S. health insurance program for the poor, grew at its slowest rate since 2006 in a signal the economy is improving, according to a survey by the Kaiser Family Foundation.

Spending on the program, which is run by states and funded largely by the federal government, rose 2 percent in the year ended Sept. 30, compared with 9.7 percent growth in fiscal 2011, the Menlo Park, California-based nonprofit research group said today in a report. Along with help from economic improvements, 48 states implemented at least one new policy to slow spending, such as cutting payments to health-care providers, Kaiser said.

“State fiscal pressures remain a concern, but improvements in state revenues and near-historic low rates of growth in Medicaid spending are signs that the economy is improving,” Kaiser researchers led by Vernon K. Smith, said in the report.

The spending increase, the smallest since a 1.3 percent gain in 2006, is closely tied to Medicaid enrollment levels, which historically rise and fall in near step with gross domestic product. The slowdown may be short-lived as Medicaid is facing what may be its biggest influx of participants, with President Barack Obama’s health-care overhaul pushing states to expand coverage to at least 11 million more people by 2022.

Former Massachusetts Governor Mitt Romney, the Republican candidate challenging Obama in the Nov. 6 presidential election, proposes to cut federal spending on the program and give states greater control over its policy.

$459 Billion

Medicaid covered about 67 million people in 2010, on the heels of the 18-month U.S. recession that ended in June 2009, according to the most recent government count. Enrollment grew about 3.2 percent last fiscal year from 4.4 percent growth the previous year, Kaiser said.

Enrollment in 2013 is projected by Kaiser to increase 2.7 percent, while spending may rise 3.8 percent, according to the report.

Spending for Medicaid is shared by states and the federal government, and is projected to reach $459 billion this year, according to the U.S. Centers for Medicare and Medicaid Services. Medicare, which covers about 49 million elderly and disabled people, will cost $591 billion.

The world’s largest economy expanded at a 1.3 percent pace from April through June after growing at a 2 percent rate in the first quarter. Economists predict gross domestic product will increase 1.8 percent in the third quarter and 1.9 percent in the fourth, according to the median of 82 estimates in a Bloomberg survey conducted Oct. 5-10.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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