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Following an Affordable Care Act-driven rise in Medicaid enrollment and total spending, both metrics slowed significantly in fiscal year 2016, but officials see upward pressure on spending from high-cost and specialty drugs.
The Kaiser Family Foundation’s report on its 16th annual 50-state Medicaid Budget Survey identifies the 2008 recession and the subsequent implementation of the ACA as the key drivers of enrollment and spending changes in the Medicaid program over the past decade.
The foundation’s analysis also points to a number of key trends:
- Medicaid enrollment and spending growth are trending downward. The policy changes introduced by the ACA increased enrollment and spending for Medicaid in fiscal year 2015. Subsequently in FY 2016, enrollment driven by the ACA has declined, which has helped to slow total spending growth. KFF expects both enrollment and spending growth to continue their declines in FY 2017.
- Prescription and specialty drug cost pressures continue to affect Medicaid spending. Medicaid officials see continued cost pressures from a combination of high drug prices and state policy actions such as reimbursement rate increases. Indeed, some predict that rising drug prices may force state Medicaid programs to turn to reimbursement cuts for health plans.
- States that have taken advantage of Medicaid expansion expect to spend more on Medicaid in FY 2017. Despite the overall downward trend in Medicaid spending growth, states expect to pay a greater share of the costs as federal subsidies for Medicaid expansion begin to phase out. KFF points out that the initial jump in the share of state spending for the expansion population rises from 0 to 5 percent in FY 2017. In FY 2018 and beyond, the federal subsidy decreases by a single percentage point per year, which the analysis indicates will likely lead to a slower growth trajectory for expansion states moving forward. The expansion of Medicaid eligibility has also been more costly than originally projected, FierceHealthPayer has reported.