This issue brief finds that Medicaid spending declined for the first time in the program’s 40-plus year history in Federal Fiscal Year (FY) 2006, falling by 0.2 percent. The two major factors that underlie the 2006 decline, in addition to a more limited effect of the slowdown in per enrollee spending growth for a few key services, were the 2005 Medicare Modernization Act’s creation of a new Medicare drug benefit that shifted the cost of prescription drugs for dual eligibles from Medicaid and a dramatic reduction in enrollment growth.

 Issue Brief (.pdf)