Medicaid projected to spend $4.9 trillion over next 10 years

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CMS reports record-high Medicaid spending. Image Source: Benefit Advisory Services  

Under current law, spending on Medicaid is expected to substantially outpace the rate of growth in the U.S. economy over the next decade, according to a new annual report released Oct. 17 by the Centers for Medicare & Medicaid Services (CMS).

The report projects that Medicaid benefits spending will increase 7.3 percent from 2007, reaching an expenditure of $339 billion in 2008, and growing at an annual average rate of 7.9 percent over the next 10 years, reaching an expenditure of $674 billion in 2017, compared to a projected rate of growth of 4.8 percent in the general economy.

Health & Human Services Secretary Mike Leavitt presented the report Oct. 17 at the fall meeting of the National Association of State Budget Officers (NASBO).

“This report should serve as an urgent reminder that the current path of Medicaid spending is unsustainable for both federal and state governments. We must act quickly to keep state Medicaid programs fiscally sound,” Leavitt said. “If nothing is done to rein in these costs, access to healthcare for the nation’s most vulnerable citizens could be threatened.”

Spending projections for Medicare are 7.4 percent per year through 2017, and Medicaid benefits spending over the next 10 years is projected to be $4.9 trillion. The amounts are in addition to that spent by federal and state governments on the State Children’s Health Insurance Program (SCHIP).

At this rate, Medicaid growth is projected to slightly exceed growth in overall healthcare expenditures, which is projected by CMS actuaries and economists to increase by 6.7 percent per year over the next 10 years, or more than twice the rate of general inflation. Also, Medicaid’s share of the gross domestic product (GDP) is projected to reach about three percent in 2017. The combined share of GDP spending for Medicare and Medicaid is projected to be 6.9 percent by 2017.     

Even with federal support, states report they are struggling to meet their share of expanding Medicaid costs. State spending on Medicaid has remained relatively stable as a share of states’ budgets, averaging about 20 percent from 1995-2007. However, some states such as Maine are already spending as much as 31 percent of their budgets on Medicaid, according to NASBO.

NASBO is projecting that state spending on Medicaid will increase by 4.4 percent from 2008 to 2009. NASBO says such an increase would be more than four times the rate of growth in the average state general fund.

Other findings from the report include:

  • Average Medicaid enrollment is projected to increase 1.8 percent to 50 million people in 2008;
  • During the next 10 years, average enrollment is projected to increase at an average annual rate of 1.2 percent and to reach 55.1 million by 2017;
  • The estimated average cost of a person covered by Medicaid in 2007 is $6,120; however, per-enrollee spending for non-disabled children ($2,435) and adults ($3,586) was much lower than that for aged ($14,058) and disabled beneficiaries ($14,858), reflecting the differing health status of these groups; and
  • Medicaid is projected to grow as a share of the federal budget from 7 percent in 2007 to 8.4 percent by 2013.