Recent trends in Medicaid expenditures

Total net Medicaid expenditures exceeded $94 billion in FY 1991, with 5 states accounting for more than 40 percent--New York, California, Massachusetts, Pennsylvania, and Texas. Nationally, inpatient and institutional long-term care payments each comprise about one-third of Medicaid spending. Medicaid expenditures have grown rapidly. From 1987 to 1991 they nearly doubled, greatly exceeding the expenditure growth for Medicare and private health insurance. This growth has been unevenly distributed. Expenditures increased by 125 percent or more in 12 States during this period, but an equal number of States had increases below 75 percent. Although expenditures grew the most slowly in institutional long-term care, this still comprises the largest payment category. Spending for inpatient services, community long-term care, insurance payments, and services not otherwise classified had the fastest rate of growth. By 1995, projected Federal expenditures for Medicaid will exceed $100 billion, approximately equal to those for Medicare in 1991. Health care inflation, State program decisions, and Federal mandates all affect the growth in Medicaid expenditures. Legislative changes have expanded coverage of pregnant women, infants, and children, and also have increased Medicaid payments of Medicare premiums and cost sharing for the elderly and disabled. Other Federal mandates raised nursing home standards and expanded EPSDT services. Legislative requirements and court challenges caused some States to increase provider payment rates. Some States developed alternative financing arrangements to accommodate the fiscal demands of higher expenditure growth. Requirements for DSH payments allowed States to use Medicaid to offset State support of public hospitals. Provider taxes and donations permitted States to increase Medicaid payments without having to raise other revenues or place an economic burden on providers. These arrangements were significantly curtailed by legislation passed in 1991.