Medicaid! Just Look At It Grow!


At the beginning of the summer, legislators in Congress balked at a proposal to extend the additional federal Medicaid funding initially included in the stimulus. And for a moment, it looked as if the money might not come through. But eventually a funding measure passed. State budgets got a big break. Officials in several states had built an expectation of that extension into their budgets, and without it, those states would've been certain to face significant shortfalls. Now, thanks to that extension, the cost of Medicaid to the states has actually declined slightly. But the program is funded jointly by the states and the federal government, meaning that the size of the state fiscal burden isn't necessarily representative of the size of the program as a whole. And a new report by Kaiser indicates that, in total, the program has expanded beyond what was expected over the last year:

This was the highest rate of growth in 8 years and exceeded the 6.3 percent spending growth that Medicaid directors had expected; higher than expected enrollment, driven by the recession and job losses, was behind the higher spending. State legislatures have authorized a slower 7.4 percent rate of Medicaid spending growth for the current fiscal year, but two-thirds of states said the chances of a spending shortfall were at least 50-50.

If you fund it, it will grow. If you fund it more, it will grow even more.

Despite the extra billions provided for the program, it's not enough. (It will never be enough.) "There seems to be no end in sight for the fiscal pressure on Medicaid programs," the lead author of Kaiser's Medicaid report tells Health Affairs. And that, of course, leads to greater and greater demands for funding. Already there's talk about extending the extra federal funding again next summer. Temporary funding is rarely temporary.

And rather than attempt to slow the program's growth, or cut it back, Congress voted to make it significantly larger: Half of the new health care law's projected expansion of  insurance coverage comes through Medicaid. By the end of the decade, that law is expected to result in additional 16 million individuals getting covered through the program. Historically, state-based efforts to expand Medicaid have not had much success. And overall the program's record is one of spotty health outcomes and rapidly expanding cost.

As John Hood explained in a recent issue of National Affairs, When the program first began, it cost about $9 billion in inflation-adjusted dollars. It passed in part because some legislators thought they could head off larger, more expensive programs by allowing this one to go through. Today the program costs more than $500 billion. Enough is never enough.