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Explaining the recent growth in Medicaid spending

J Holahan1, D Rowland, J Feder

  • 1Health Policy Center, Urban Institute.

Health Affairs (Project Hope)
|January 1, 1993
PubMed
Summary

Medicaid spending more than doubled between 1988 and 1992 due to expanded eligibility, recession-driven enrollment increases, and greater state utilization of federal funds. This surge reversed previous cost containment trends in the program.

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Area of Science:

  • Health Economics
  • Public Health Policy
  • Government Healthcare Programs

Background:

  • Medicaid spending experienced a significant increase, more than doubling from 1988 to 1992.
  • This spending surge marked a reversal of a prior period of cost containment within the Medicaid program.

Purpose of the Study:

  • To investigate the primary drivers behind the rapid escalation of Medicaid expenditures during the specified period.
  • To analyze the relative contributions of enrollment changes, inflation, and reimbursement adjustments to increased Medicaid spending.

Main Methods:

  • The study examines trends in Medicaid spending, enrollment figures, and reimbursement policies.
  • It analyzes the impact of legislative changes, economic conditions, and state-level fiscal strategies on program costs.

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Main Results:

  • Medicaid spending more than doubled from 1988 to 1992, a period marked by significant policy shifts and economic challenges.
  • Key factors contributing to this increase include expanded eligibility for vulnerable populations (children, pregnant women, low-income elderly), increased enrollment due to recession, a rise in disabled recipients, and enhanced state leveraging of federal funds.
  • The analysis explores the differential impact of enrollment fluctuations, inflation rates, and reimbursement hikes on overall spending.

Conclusions:

  • The dramatic rise in Medicaid spending was multifactorial, driven by policy expansions and economic pressures.
  • Understanding these drivers is crucial for future Medicaid program management and cost control strategies.