Issue brief: Medicaid spending growth, payment rates relatively low

Any effort to reform Medicaid financing should take into account evidence that the program already has low payment rates and low spending growth, meaning further reductions could hurt beneficiaries' access to care, according to an issue brief from the Kaiser Family Foundation.

Medicaid spending continues to be a hot-button issue, given overall concerns about federal and state budgets, the brief says. So to get a full picture of trends in Medicaid spending, KFF examines 40 separate studies on the subject.

Some of the research, the brief says, shows that after adjusting for Medicaid enrollees' greater health needs, per capita spending in Medicaid is lower than that of private insurers. This difference, according to one study, can be attributed to lower provider payment rates in the Medicaid program.

Such lower payment levels in Medicaid have also contributed to its low costs relative to other insurers, the brief adds. One study, it says, showed that Medicaid physician fees were just 66 percent of Medicare fees in 2014.

Increases in Medicaid spending, meanwhile, are mostly tied to rising enrollment in the program, the according to the brief. Indeed, Medicaid enrollment and spending both increased substantially in 2015, the first full year many of the Affordable Care Act's provisions took effect.

Medicaid spending growth per enrollee, though, has been low compared to other insurers. Growth in per-enrollee Medicaid spending on medical services mirrored GDP per capita growth from 2007 to 2013, according to one study cited in the brief, and was lower than per-enrollee spending growth among private payers.

There are opportunities for the Medicaid program to reduce spending via care delivery reform initiatives, such as those aimed at reducing hospital readmissions, the brief says. However, those proposals must be careful not to pressure states to further lower provider payment rates, which can come at the expense of beneficiaries' well-being.

To learn more:
- read the issue brief

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