Thanks to Recession, More Americans Rely on States for Health Insurance

Because of the nation’s deep recession, states experienced rapid growth in Medicaid enrollment and spending last year and expect additional growth, though at a slower pace, in fiscal year 2011, according to a survey of state Medicaid officials in all 50 states by the Kaiser Family Foundation’s Commission on Medicaid and the Uninsured (KCMU).
States reported an average increase in Medicaid spending of 8.8 percent across all states in fiscal year 2010, the highest rate of growth in eight years and well above original projections of 6.3 percent growth. Medicaid directors attributed the unexpected jump to higher-than-expected increases in eligible families due to the recession, which pushed the national unemployment rate above 10 percent, with even higher rates in some states.
For fiscal year 2011 (which runs through June 2011), states budgeted for an average 7.4 percent increase in spending above fiscal year 2010 – a slightly slower rate of growth consistent with expectations that enrollment growth will slow to 6.1 percent, according to the survey.

The American Recovery and Reinvestment Act of 2009 (ARRA) provided a temporary boost in the federal government’s share of Medicaid costs, providing an estimated $87 billion to states starting in October 2008. The ARRA’s increased federal Medicaid support was originally scheduled to end in December 2010, but in August, Congress enacted additional relief for states through June 2011 at a reduced level, providing $16 billion over six months.
“The recession swamped state budgets and Medicaid programs, but with the extra federal aid, Medicaid helped millions of additional people as intended during tough times,” said Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of the Kaiser Commission on Medicaid and the Uninsured. “Looking ahead, states will face new challenges as the federal aid winds down and as they prepare for health reform.”
A separate KCMU report finds that Medicaid enrollment increased by nearly 6 million people between the start of the recession in December 2007 and December 2009. In December 2009, 48.5 million people were enrolled in state Medicaid programs, an increase of 1.6 million over June 2009 and 3.7 million over December 2008, at an annual growth rate of 8.2 percent. State-by-state totals included in the Medicaid enrollment report show that every state experienced a year-over-year increase.

Federal relief helped states preserve eligibility
States report that the federal fiscal relief provided critical assistance to close Medicaid budget gaps in both fiscal years 2009 and 2010, as states experienced their sharpest decline in revenues on record, according to the 50-state survey report.
Even with the extra funds, 48 states implemented at least one new policy to curb Medicaid spending in fiscal year 2010, and 46 states plan to do so in fiscal year 2011. States generally did not reduce Medicaid eligibility levels, as ARRA required the states to maintain those efforts to receive the enhanced federal aid, but took actions in other areas:

• A record 20 states implemented new restrictions on benefits in fiscal year 2010, and 14 states plan new restrictions in fiscal year 2011. This includes the elimination of some or all dental services in Arizona, California, Hawaii, and Massachusetts. Other states limited benefits, including imaging services, medical supplies, therapies, and personal care services.

• Thirty-nine states implemented a provider rate cut or freeze in fiscal year 2010, and 37 states plan similar action in 2011.

• Eighteen states implemented utilization controls and other reductions on long term care services in fiscal year 2010, and 10 states plan to do so in fiscal year 2011.

In spite of the tight budget environment, many states reported acting to simplify or expand Medicaid eligibility and benefits – often for small populations, though a few states, including Colorado and Wisconsin, are implementing broader reforms and eligibility expansions. Some of those efforts to streamline enrollment could help states qualify for performance bonus payments enacted as part of the Children’s Health Insurance Program Reauthorization Act of 2009. States also continue to expand community-based long-term care services, focus on improvements to delivery systems and develop health information technology in Medicaid.

States see future budget, health reform implementation challenges
Even with an improving economy, state Medicaid directors expect the recession’s impact to linger, as the phase-out of enhanced federal assistance will boost the state’s share of costs in fiscal year 2012 by 25 percent or more in some case, the survey finds.