Federal Medicaid spending will grow by only 2.3% in fiscal 1996, less than a third of the expected rate, according to new projections released by government analysts.
Medicare spending also has risen more slowly than expected, the Congressional Budget Office said. In May, the CBO estimated Medicare spending would rise at an annual rate of 10.7% in 1996, but the newest report projects only a 9.9% annual increase.
According to the CBO, Medicaid spending is now projected to total $92 billion in fiscal 1996, $4 billion less than originally estimated. Spending on Medicare is now projected at $195 billion in 1996, $1 billion less than previously estimated.
A CBO analyst, speaking on condition of anonymity, said the government is unsure why Medicaid spending, originally projected to grow by more than 7.5%, has slowed so dramatically. Factors that probably contributed to the slowdown include increased use of managed care for Medicaid beneficiaries and the federal clamp-down on provider tax and donation schemes to draw more federal matching funds for states, the analyst said. Medicaid enrollment has stabilized in the past year after years of significant increases, the analyst added.
Because the developments represent "significant changes in the operation of state Medicaid programs," the CBO said, Medicaid spending also will be reduced in subsequent years.
Congressional Republicans hailed the slowdown in Medicaid and Medicare growth, which they said would reduce the future spending restraints necessary to reach a balanced budget.
"This is going to make our Medicaid proposal look better," said an aide who asked not to be identified.
The GOP balanced-budget plan unveiled earlier this year would have reduced projected Medicaid spending by $72 billion over six years. A Republican spokesman said no estimate of how that figure would be affected by the new CBO analysis was available.