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States Look at Ways to Contain Medicaid Costs

By CQ Staff

June 12, 2012 -- State spending on Medicaid continues to outpace other state expenditures while the federal contribution to the program has markedly decreased, according to a fiscal survey of the states the National Governors Association and the National Association of State Budget Officers released last week. The report also lays out some cost-containment strategies state officials plan to put in place.

State spending on Medicaid increased 20 percent in fiscal 2012, the report said, after a 23 percent increase in 2011. But federal spending on the health program for the poor dropped by 8 percent. Proposed state budgets for fiscal 2013 project a 4 percent growth rate in state Medicaid spending, still more than the increases projected for other state programs.

Governors are planning to shift the emphasis of some of their cost-containment methods. For example, 30 states reduced payments to providers in 2012. Such cuts are included in 2013 budget proposals in just 15 states. States plan in 2013 to focus more on long-term strategies, such as moving more beneficiaries into managed care plans (20 states) and concentrating on improving program integrity, which governors in 25 states have put in their 2013 spending plans.

Also in fiscal 2013 budget proposals, governors in 10 states want to freeze provider rates and in 19 they want to overhaul the delivery system. Eighteen governors want to reduce costs and impose limits for prescription drugs, 18 want to limit benefits and governors in seven states want to institute new or higher copays.

According to the report, "Medicaid is the single largest portion of total state spending, estimated to account for 24 percent in fiscal 2011, the last year for which data is available. State funds directed towards Medicaid increased dramatically in fiscal 2012, while federal spending rapidly declined because of the expiration of the enhanced federal matching rates temporarily authorized by American Recovery and Reinvestment Act of 2009 (ARRA)."

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