Medicaid growth expected to strain state, federal budgets

Sunday, October 19, 2008

WASHINGTON -- Medicaid's growing strain on federal and state budgets is unlikely to abate over the coming decade as the cost of providing health care to the poor is expected to increase 7.9 percent annually, government actuaries reported Friday.

Each year, trustees for the nation's Medicare and Social Security programs update the public on the financial health of the two entitlement programs. Now, federal officials are trying to set a similar precedent for Medicaid -- which serves about 50 million people. Actuaries for the Centers for Medicare and Medicaid Services released their first report Friday on the program's past trends and outlook.

Actuaries said the cost increases they expect in the coming decade are not unique to Medicaid. Costs for every form of health coverage have increased rapidly and reflect new, better and more complex services as well as wage inflation in the medical sector. While Medicaid will grow at a 7.9 percent rate, the overall economy during the next 10 years is projected to grow at a rate of 4.8 percent.

Health and Human Services Secretary Mike Leavitt said the analysis was a reminder Medicaid spending is on an unsustainable path.

"If nothing is done to rein in these costs, access to health care for the nation's most vulnerable citizens could be threatened," Leavitt said.

Medicaid is a federal-state partnership. The program cost $333.2 billion in the fiscal year ending Sept. 30, 2007, with the federal government paying about 57 percent of that tab and states the remainder.

Actuaries said the growth rate for the coming decade does not reflect the current economic woes the country is facing. Medicaid rolls tend to increase when the economy struggles. About half of enrollees are children, who got an estimated $2,435 worth of benefits, while adults obtained $3,586 in benefits. Expenses are substantially greater for the disabled and elderly -- more than $14,000 per person.

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