Healthcare Business News

States show vast Medicaid spending discrepancies in GAO report

By Paul Demko
Posted: July 16, 2014 - 8:45 pm ET

Spending on Medicaid enrollees varied widely across the country in fiscal year 2008, according to an analysis conducted by the U.S. Government Accountability Office.

In eight states, including New York, each beneficiary cost at least $10,500. By contrast, in six states, including California and Illinois, the cost per enrollee was less than $6,000. The per-enrollee cost in the remaining 35 states and the District of Columbia fell somewhere between those two amounts. (Massachusetts was excluded because of errors in the state’s data.)

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California’s program was the most economically efficient, spending roughly $3,800 per Medicaid enrollee. At the other end of the spectrum was Rhode Island, which spent $11,700 on coverage for each beneficiary. However, the GAO noted that because of imperfect data, the numbers should be viewed with some caution.

The analsyis was requested by Sen. Orrin Hatch (R-Utah) and Rep. Fred Upton (R-Mich.). Hatch, the ranking member of the Senate Finance Committee, called for additional scrutiny of the spending discrepancies. “Understanding these differences is instrumental in making real reform to this program that Obamacare has so carelessly expanded,” Hatch said in a statement.

The discrepancies extended to different categories of beneficiaries. Disabled enrollees, for instance, cost an average of $9,000 in Alabama, compared with $32,000 in New York. Likewise, Vermont spent more than three times as much as California on each child enrolled in Medicaid.

The differences can be partly explained by variations in the makeup of the Medicaid population in each state. West Virginia, for example, had the highest rates of elderly and disabled beneficiaries, who generally are more expensive to cover, with 38% of enrollees defined by those categories.

But states also showed marked differences in coverage patterns for individuals within the same demographic groups. The percentage of elderly enrollees receiving expensive long-term care services varied from 18.4% in Florida to 65.6% in Iowa.

Each state sets up its own Medicaid plan, which must be approved by the CMS. Increasingly states are moving away from fee-for-service models in favor of managed care, which pays health plans a flat fee to provide coverage.

Last year, the federal government spent $267 billion on its insurance program for low-income households. That number is expected to rise to nearly $600 billion by 2024, according to the Congressional Budget Office. Roughly 7 million individuals have signed up for Medicaid since the rollout of insurance reforms under the Patient Protection and Affordable Care Act last year. States have the option of expanding eligibility to individuals with incomes up to 138% of the federal poverty level; about half the states have opted to implement this expansion.

Follow Paul Demko on Twitter: @MHpdemko

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