Causes of Medicaid expenditure growth

Expenditures for the Medicaid program grew at the alarming and unexpected average annual rate of nearly 20 percent from 1989 ($58 billion) to 1992 ($113 billion). These statistics raise a critical question: What caused spending to grow so dramatically? Using State-level data from 1984-92, this analysis examines the determinants of Medicaid expenditure growth. The results indicate that Medicaid enrollment, Federal Medicaid policy, and State policy are significantly related to Medicaid expenditure growth. The analysis also finds the prevalence of acquired immunodeficiency syndrome (AIDS) to be significantly related to Medicaid expenditures.     

Budget deal taps Medicaid to pay for new tax cuts

AIDS advocates are relieved that Congress and the White House have agreed on a $15 billion reduction in the Medicaid budget. While this cut is significant, a previously proposed plan would have cut Medicaid even further and instituted an annual cap on the amount of health-care dollars a patient could receive. It now appears that capping Medicaid spending per Medicaid beneficiary is no longer a component of the budget agreement. The Clinton Administration anticipates a 6 percent increase of the Federal share of AIDS-related medical costs to $1.9 billion. AIDS Action recommended increasing funding for the Ryan White CARE Act by $393.9 million; the Clinton administration suggests a $40 million increase. AIDS Action also proposed biomedical and behavioral research funded by the National Institutes of Health (NIH) to rise by $134.5 million; the Clinton administration proposes a $39 million increase. A recent survey found that almost 70 percent of Americans support the notion that Medicaid should extend AIDS drug therapies to low-income people in the early stages of HIV infection. These findings will be used to bolster AIDS Action's argument that the Federal Health Care Financing Administration should extend Medicaid to more low-income people who lack private insurance.     

The impact of Medicaid adoption of the Medicare fee schedule

In this article, the authors simulate the effects on Federal and State Medicaid expenditures of increasing Medicaid fees to Medicare fee schedule (MFS) levels. Strict adoption of the MFS by the States would increase total Medicaid spending by approximately 4 percent, $2.5 to $2.9 billion. Because Medicaid fees vary across States, so does the impact of adopting the MFS. Medicaid spending would increase significantly in some wealthy States with large Medicaid populations and in a few small, relatively poor States. Some States currently pay more than the MFS for obstetrical services. If these fees continued at higher levels for obstetrical care, total Medicaid spending would increase by $3.5 to $4.0 billion.     

National health expenditures, 1991

Spending for health care rose to $751.8 billion in 1991, an increase of 11.4 percent from the 1990 level. National health expenditures as a share of gross domestic product increased to 13.2 percent, up from 12.2 percent in 1990. The health care sector exhibited strong growth, despite slow growth in the overall economy. This combination resulted in the largest increase in the share of the Nation's output consumed by health care in the past three decades. In this article, the authors present estimates of health spending in the United States for 1991. The authors also examine reasons for the unusually large growth in Medicaid expenditures and highlight recent trends in the hospital sector.     

Incorporating Added Therapeutic Benefit and Domestic Reference Pricing Into Medicare Payment for Expensive Part B Drugs

ObjectivesIdentify expensive Part B drugs and evidence for each drug’s added benefit and model a reimbursement policy for Medicare that integrates added benefit assessment and domestic reference pricing.MethodsA retrospective analysis using a 20% nationally representative sample of 2015 to 2019 traditional Medicare Part B claims. Expensive drugs were defined as having average annual spending per beneficiary exceeding the average annual social security benefit ($17 532 in 2019). For expensive drugs identified in 2019, added benefit assessments conducted by the French Haute Autorité de Santé were collected. For expensive drugs with a low added benefit rating, comparator drugs were identified in French Haute Autorité de Santé reports. For each comparator, average annual spending per beneficiary in Part B was computed. Potential savings from 2 reference pricing scenarios were calculated: reimbursing expensive Part B drugs with low added benefit at the level of each drug's (1) lowest cost comparator and (2) beneficiary-weighted-average cost of all comparators.ResultsThe number of expensive Part B drugs grew from 56 in 2015 to 92 in 2019. Of the 92 expensive drugs in 2019, 34 offer low added benefit. Implementing reference pricing for these expensive drugs with low added benefit could have saved an estimated $2.1 billion if prices were set based on spending for their lowest cost comparator, or $1 billion if prices were set based on the weighted average of spending for comparators.ConclusionReference pricing based on added benefit assessment could be used to address the launch prices for expensive Part B drugs with low added benefit.     

The Medicaid maze: states and hospitals take new paths in search of funding

No longer are health care providers simply warning state governments of impending Medicaid troubles. They now are actively pitching in to try to help find solutions to what has become a nationwide crisis. Federal mandates expanding Medicaid eligibility, an increase in unemployment and medical indigency, and providers' attempts to obtain equitable reimbursement are compelling state governments to get creative. It's none too soon: In FY 1990, states spent $662 billion more on Medicaid than they had originally budgeted, while federal and state Medicaid spending is expected to increase by 25 percent in FY 1991.     

Trends in spending for substance abuse treatment, 1986-2003

Since 1987, public and private investment in substance abuse (SA) treatment has not kept pace with other health spending. SA treatment spending in the United States grew from $9.3 billion in 1986 to $20.7 billion in 2003. The average annual total growth rate was 4.8 percent. In comparison, total U.S. health care spending grew by 8.0 percent. As a result of the slower growth of SA spending compared to that for all health care, SA spending fell as a share of all health spending from 2.1 percent in 1986 to 1.3 percent in 2003.     

Federal budgetary costs of blindness.

Federal expenditures for blindness-related disability among Americans are examined. The government, rather than the private sector, frequently bears the economic consequences of visual disability through entitlement and public assistance programs. Findings suggest an average $11,896 federal cost of a person-year of blindness for a working-aged American, which includes income assistance programs (SSDI/SSI), health insurance programs (Medicare/Medicaid), and tax losses resulting from reduced potential earnings. Almost 97 percent of the aggregate annual federal costs of blindness in 1990, which totaled approximately $4 billion, is accounted for by working-aged adults, who represent less than one-third of the total blind population. Approximately 25 percent of all blindness is attributed to preventable causes.     

Simulating the fiscal and distributional impacts of Medicaid eligibility reforms

About 43 percent of nursing home costs are paid by Medicaid for the poor and for those who spend-down assets to qualify for Medicaid. We estimate the costs and distributional impacts of changes in the Medicaid asset test and the effect on the number of people spending down to Medicaid eligibility levels. Increasing asset thresholds from $2,00 to $12,000 would cost less than $4 billion, reduce spend-down rates, and increase the proportion of people eligible for Medicaid on admission to a nursing home. Even after such a change, about 80 percent of Medicaid benefits accrue to individuals with incomes less than $10,000.     

Medicaid expenditures for maternity and newborn care in America

An Alan Guttmacher Institute (AGI) survey of the Medicaid programs in each state and the District of Columbia found that some 542,000 low-income women have a Medicaid-subsidized delivery each year--about 15 percent of all women who give birth. The proportion ranges from three percent in Alaska to 25 percent in Michigan. The federal and state governments spend almost $1.2 billion annually for maternity care (including prenatal, postpartum and newborn care); the average expenditure per patient is $2,200. Tennessee reports the highest expenditure per patient ($3,500) and Louisiana the lowest ($1,300). Only the highest payments under Medicaid are close to charges for maternity care in the open market, a fact that results in a significant disincentive for physicians and hospitals to accept Medicaid patients. The $1.2 billion spent for Medicaid-subsidized maternity care compares with an estimated $11.5 billion spent for such care nationwide. Thus, Medicaid pays for about 10 percent of the nation's maternity care bill, although Medicaid subsidizes deliveries for 15 percent of all women who give birth. The figures for maternity care do not include Medicaid expenditures for neonatal intensive care, which, for the 17 states reporting data, average about $11,800 per infant. Although only about six percent of all newborns whose deliveries are subsidized by Medicaid require neonatal intensive care, such care is so expensive that it adds about 30 percent to all Medicaid expenditures for maternity care. Increased Medicaid payments for maternity care, including prenatal care, could have a positive impact on health outcomes for low-income mothers and their babies, and could reduce the necessity for massive and expensive medical treatment for newborns.     

Health care costs are a key driver of growth in federal and state assistance to working-age people with disabilities

A large and rapidly growing share of US government expenditures pays for assistance to working-age people with disabilities. In 2008 federal spending for disability assistance totaled $357 billion, representing 12 percent of all federal outlays. The states' share of joint federal-state disability programs, more than 90 percent of it for Medicaid, was $71 billion. The increased cost of health care-which represented 55 percent of combined state and federal outlays for this population in 2008-is one of the two main causes of spending growth for people with disabilities. Health care is already likely to be a target of further efforts by states and the federal government to contain or reduce spending, and it is therefore probable that spending restraints will affect the working-age population with disabilities. In fact, unless ways can be identified to make delivery of health care to this population more efficient, policy makers may be unable to avoid funding cuts that will further compromise its well-being.     

President seeks 3 percent increase in AIDS funding for '98

President Clinton's spending proposals for 1998 include increased funding for AIDS research, care, and treatment, as well as initiatives to help people return to work if their multidrug therapy is effective. Some AIDS advocates are still disappointed with this funding level and predict that there will be a shortage of funds available to provide adequate services to HIV/AIDS patients. Advocates also expressed concern over reduced Medicaid spending since many AIDS patients rely completely on Medicaid for health care. The spending proposal keeps Federal funding for the network of State AIDS drug assistance programs at $167 million despite the demand for multidrug treatments. The budget includes $634 million for AIDS-related programs at the Centers for Disease Control and Prevention (CDC) and $1.54 billion for AIDS-related research directed through the National Institutes of Health (NIH) Office of AIDS Research. The total cost of AIDS care, research, and prevention reaches nearly $8.9 billion. Funding proposals for each agency and allocations for the Ryan White CARE Act are outlined.     

Health and federal budgetary effects of increasing access to antiretroviral medications for HIV by expanding Medicaid

OBJECTIVES. This study modeled the health and federal fiscal effects of expanding Medicaid for HIV-infected people to improve access to highly active antiretroviral therapy. METHODS: A disease state model of the US HIV epidemic, with and without Medicaid expansion, was used. Eligibility required a CD4 cell count less than 500/mm3 or viral load greater than 10,000, absent or inadequate medication insurance, and annual income less than $10,000. Two benefits were modeled, "full" and "limited" (medications, outpatient care). Federal spending for Medicaid, Medicare, AIDS Drug Assistance Program, Supplemental Security Income, and Social Security Disability Insurance were assessed. RESULTS: An estimated 38,000 individuals would enroll in a Medicaid HIV expansion. Over 5 years, expansion would prevent an estimated 13,000 AIDS diagnoses and 2600 deaths and add 5,816 years of life. Net federal costs for all programs are $739 million (full benefits) and $480 million (limited benefits); for Medicaid alone, the costs are $1.43 and $1.17 billion, respectively. Results were sensitive to awareness of serostatus, highly active antiretroviral therapy cost, and participation rate. Strategies for federal cost neutrality include Medicaid HIV drug price reductions as low as 9% and private insurance buy-ins. CONCLUSIONS: Expansion of the Medicaid eligibility to increase access to antiretroviral therapy would have substantial health benefits at affordable costs.     

Differences in the volume of services and in prices drive big variations in Medicaid spending among US states and regions

It is well known that Medicaid spending per beneficiary varies widely across states. However, less is known about the cause of this variation, or about whether increased spending is associated with better outcomes. In this article we describe and analyze sources of interstate variation in Medicaid spending over several years. We find substantial variations both in the volume of services and in prices. Overall, per capita spending in the ten highest-spending states was $1,650 above the average national per capita spending, of which $1,186, or 72?percent, was due to the volume of services delivered. Spending in the ten lowest-spending states was $1,161 below the national average, of which $672, or 58?percent, was due to volume. In the mid-Atlantic region, increased price and volume resulted in the most expensive care among regions, whereas reduced price and volume in the South Central region resulted in the least expensive care among regions. Understanding these variations in greater detail should help improve the quality and efficiency of care-a task that will become more important as Medicaid is greatly expanded under the Affordable Care Act of 2010.     

Covering the uninsured in 2008: current costs, sources of payment, and incremental costs

People uninsured for any part of 2008 spend about $30 billion out of pocket and receive approximately $56 billion in uncompensated care while uninsured. Government programs finance about 75 percent of uncompensated care. If all uninsured people were fully covered, their medical spending would increase by $122.6 billion. The increase represents 5 percent of current national health spending and 0.8 percent of gross domestic product. However, it is neither the cost of a specific plan nor necessarily the same as the government's costs, which could be higher, depending on plans' financing structures and the extent of crowd-out.