Record Increase in State Medicaid Spending Projected

States are taking multiple steps to tighten their Medicaid belts. The most common strategy has been to reduce provider payments. Some 39 states already take that step and seven more report plans to implement payment reductions in 2012. Other steps include:

• New and increased copayments. Six states have already made copayment changes and 14 more expect to follow suit in 2012. Pharmacy benefits and emergency rooms account for most of the copayment changes.
• Reduced or limited benefits. States are trimming benefits and imposing utilization limits on optional benefits such as dental services, therapies, medical supplies, durable medical equipment, and personal care services. Almost all states have added preferred drugs lists to their pharmacy benefit package and many are looking at implementing cost controls on specialty drugs, as well as introducing competitive bidding for pharmacy contracts.

States are also trying to make their Medicaid programs more efficient by making changes in how qualifying services are delivered. According to the Kaiser Foundation survey, these efforts are focused in three areas:

• Managed care. An estimated 66% of Medicaid beneficiaries are enrolled in some form of managed care. At least 17 states expanded their Medicaid managed care programs in FY 2011 by adding geographic areas and expanding the eligible populations. Another 24 states are poised for expansion in FY 2012.
• Disease and care management. States are expanding their disease and care management programs to help coordinate care for dual Medicare-Medicaid eligibles and beneficiaries with chronic conditions. According to the survey, 37 states have submitted letters of intent to expand their efforts to coordinate care for “dual eligibles”—people qualifying for both programs.
• Long-term care. More than 33 states are shifting Medicaid long-term care away from institutions and into community-based settings.

Despite these efforts, Medicaid officials in more than half the states said in the survey that there is a 50-50 chance that they will see a budget shortfall in FY 2012 as Medicaid enrollment continues to grow. But there is also some good news for Medicaid in the survey—the rate of enrollment growth has steadily declined since 2009. States project a 4.1% enrollment increase in 2012. That’s down from a 7.8% increase in 2009.

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