The annual growth in spending on Medicaid slowed sharply last year as the economy began to improve, a survey by the Kaiser Family Foundation found. Enrollment in the program grew only modestly as well, but that may change as millions of people are due to become eligible in 2014 under the new national health care law.
Medicaid provides health and long-term care coverage to more than 60 million poor people, at a combined cost to the states and federal government of more than $400 billion a year. During the recession, as Americans lost jobs and health insurance, enrollment in the program rose sharply, and states struggled under the weight of its costs.
But in the fiscal year that ended for most states in June, total spending on Medicaid grew by only 2 percent — much less than the nearly 10 percent increase in 2011 and one of the lowest rates on record. The slowdown is due not only to more measured enrollment growth — 3.2 percent, compared with 4.4 percent in 2011 and 7.2 percent in 2010 — but also to continued cost-cutting by states.
"Reining in costs remains the dominant theme," said Diane Rowland, executive vice president of the Kaiser Family Foundation, a nonpartisan group that conducts the survey annually with Health Management Associates, a research and consulting firm.
The most typical Medicaid spending cuts were to reimbursement rates for hospitals and doctors and to optional benefits, like dental, vision and drug coverage. Forty-five states cut or froze reimbursement rates last year, according to the report, while 18 scaled back benefits. Many also expanded the use of managed care for their Medicaid populations.
The national health care law has generally prohibited states from tightening eligibility for Medicaid before 2014, when the law envisions expanding the program to cover more low-income people.
So the slowing of enrollment is not because fewer people are qualifying, Ms. Rowland said, but because fewer "are coming through the door."
Last year was something of an aberration, because states stopped receiving extra federal Medicaid funds that had flowed for nearly three years as part of the federal stimulus act. Without the additional help, the state share of Medicaid spending rose by 27.5 percent last year, according to the survey.
That put additional pressure on states to limit costs and helps explain the modest increase in spending.
Medicaid has been the subject of heated national debate in recent months, both because the Supreme Court ruled in June that states could opt out of the expansion that is a cornerstone of the health care law and because President Obama and Mitt Romney, his Republican challenger, have sharply different visions for the program's future.
Mr. Romney and Republicans in Congress want to repeal the health care law and replace the current Medicaid program with block grants, giving each state a fixed amount of federal money each year and more control over eligibility and benefits. (The federal government currently sets minimum requirements, like covering all children under the poverty level, and provides unlimited matching funds.)
Medicaid spending will grow modestly again this fiscal year, the survey found, with an average increase of 3.8 percent.
Enrollment will continue to increase, but by only 2.7 percent, an even slower rate than last year. More than one-third of states say they could see a Medicaid budget shortfall, but that is an improvement over last year, when more than half of states predicted a shortfall.
States will also step up attempts to better coordinate care for Medicaid enrollees, especially those with expensive chronic conditions. Thirty states started or expanded such programs last year, the survey found, and 45 are doing so this fiscal year.
Many such programs focus on "dual eligibles" — nine million people who qualify for both Medicare and Medicaid, are especially complicated to treat and account for a disproportionate share of spending.
"Those changes are an investment up front and require a longer lead time in terms of seeing savings down the road," Ms. Rowland said.
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