Good news last week on the Medicaid spending and funding front doesn't necessarily mean more will follow.
A new report shows that state revenue increased at a faster pace than Medicaid spending for the first time in eight years. But health policy watchers said they are nevertheless reluctant to award the program comeback player of the year status.
The report, released last week by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured, showed that in fiscal 2006, state tax revenue grew 3.7%, compared with 5.3% in 2005, while spending growth on Medicaid dropped to 2.8%, from 6.3% in fiscal 2005.
Additionally, Medicaid enrollment growth also slowed, up by just 1.6%, the lowest increase since 1999 and nearly half of the 3% predicted by Medicaid officials for the year.
But longtime observers of state and federal healthcare initiatives, though pleased by the report's findings, said they are wary that the rising number of uninsured and the increasing number of chronically ill patients could eventually overburden Medicaid.
Georges Benjamin, a physician who is executive director of the American Public Health Association, sounded a note of cautionespecially on the enrollment data.
"Numbers like these are very deceptive,'' he said. "The real question is why the numbers are down. And some of that is because of some of the things that already happened in terms of people losing coverage.''
Benjamin also warned that as the ranks of the uninsured swell, the Medicaid program would also suffer. Earlier this year, the U.S. Census Bureau tallied some 46.6 million people who did not have health insurance coverage in 2005, which was up 2.9% from 45.3 million in 2004. At the same time, the number of uninsured children rose to 8.3 million, up 5.1% from 7.9 million in 2004 (Sept. 4, p. 7).
"As more and more people lose coverage ... this may turn out to be a short-lived phenomenon,'' he said.
Even as enrollment levels have been contained, state health officials said they, too, remain concerned. Stan Rosenstein, deputy director of medical-care services for the state of California, cautioned that unless the program focuses more on treating the chronically ill, spending could slip back up. In the Golden State, 5% of patients on Medicaid account for 60% of the program's expenditures, he said.
"It's important that states be given the tools to deal with those challenges,'' he said.
Still, it's a stunning turnaround from only four years ago, when state and federal spending on Medicaid far exceeded the proportion of state tax revenue, said Vernon Smith, a principal with Health Management Associates. "In the past, state budgets were under so much stress (to lower spending) that states could only play defense,'' he said. "Now, states can play some offense.''
Smith said that the Medicaid program "is acting exactly as it should,'' adding that the more than $300 billion program is designed to be countercyclical. In other words, when the economy slumps, joband individual savings accountstend to dry up. As a result, more people find themselves in need of Medicaid assistance.
During the last economic downturn, many states chose to freeze or reduce provider payment rates as a way to rein in Medicaid spending, the report states. But over the past four years, many of those same states have undone those freezesor at least plan to in 2007. And as the pressure continues to ease, 26 states said they plan to reinstate some of the benefits that had been trimmed over the years.
"In fiscal 2007, no states proposed cutting Medicaid rates for inpatient hospitals, physicians, nursing-home facilities or managed-care organizations,'' Smith said.
It's unclear what effect the latest Medicaid trend data will have on future budget proposals. In February, President Bush unveiled his fiscal 2007 budget, which contained sizable federal reductions for Medicaid. The budget proposes reductions of $1.5 billion over five years and $5.1 billion over 10, as well as regulatory changes that would reduce federal spending by an additional $12.2 billion over five years.
"Most states are having relatively good revenue growth, so the state budgets were in balance,'' said Leighton Ku, senior fellow in health policy at the Center on Budget and Policy Priorities. "The net effect has been that the big crisiswhere states were under big pressurehas temporarily been halted. Hopefully that will continue into next year.''