State Budgets for Fiscal Year 2020 Include Total Medicaid Spending Growth of 6.2 Percent on Average, Even As Enrollment Remains Essentially Flat
Rising Costs for Prescription Drugs, Provider Rate Increases and Care for the Elderly and People with Disabilities Are Factors, Annual 50-State Survey Finds
States budgeted for total Medicaid spending to increase at a faster pace than enrollment in fiscal year 2020, driven in part by rising costs for prescription drugs, provider rate increases and higher costs associated with caring for the elderly and disabled, according to KFF’s new 50-state Medicaid budget survey.
The 19th annual survey of state Medicaid directors finds that officials expect total Medicaid spending to climb 6.2 percent while enrollment remains virtually flat, up 0.8 percent. This follows total Medicaid spending growth of 2.9 percent for fiscal 2019, a year in which enrollment declined 1.7 percent.
Officials identified increasing costs for prescription drugs (particularly for specialty drugs), provider rate increases (most often for managed care organizations, hospitals, and nursing facilities) and pressures from the aging population and long-term care costs as key upward drivers of total Medicaid spending.
States generally attributed enrollment declines to a stronger economy; however, some states also pointed to process and systems changes including changes to renewal processes, upgraded eligibility systems and enhanced data matching efforts to verify eligibility as putting a downward pressure on enrollment. Recent Census Bureau data show an increase in the number of uninsured in the U.S., suggesting that some people losing Medicaid coverage may not gain access to employer-based health benefits and are not buying their own insurance.
State Medicaid spending accounted for 37.5 percent of the $593 billion in overall Medicaid spending in federal fiscal year 2018. Reported data for this survey shows that average state Medicaid spending is budgeted to increase by 5.7 percent in state fiscal year 2020, after rising 1.1 percent in 2019.
State Medicaid spending growth, which typically moves in the same direction and at a similar rate to total Medicaid spending, was lower than total Medicaid spending growth in FY 2019 and is expected to be lower again in FY 2020. In FY 2019, state Medicaid spending grew slower than overall general fund expenditure growth. The Affordable Care Act requires that expansion states assume an increasing share of Medicaid expansion costs, with their share rising from 6 percent in January 2018, to 7 percent in 2019 and 10 percent in 2020, where it will remain.
Thirty-six states and Washington D.C. have adopted the Medicaid expansion, with implementation expected in 2020 for Idaho, Nebraska and Utah (although implementation could be in FY 2021 for Nebraska and Utah). Most expansion states relied on general funds to finance the expansion, but a number also reported using provider taxes or other savings from the expansion.
The annual survey provides an in-depth, state-specific examination of changes and initiatives taking place in Medicaid programs. Some notable findings include:
Work requirements. The most frequently reported eligibility restrictions implemented in FY 2019 or planned for FY 2020 are work or community engagement requirements. Six states (AZ, IN, MI, OH, UT, WI) currently have approved Section 1115 work requirement waivers. Nine states (AL, ID, MS, MT, OK, SC, SD, TN, VA) have pending waivers for work requirements. With the exception of Virginia, Montana, and Idaho, all other pending work requirement waivers are from non-expansion states. Three states (KY, AR, NH) have had work requirement waivers set aside by the courts following legal challenges and litigation was filed challenging the work requirement waiver in Indiana.
Prescription drug cost containment. Amid rising concerns about the cost of prescription drugs, 24 states in FY 2019 and 26 states in FY 2020 reported newly implementing or expanding at least one initiative to contain prescription drug spending. Strategies include value-based contracts linking reimbursement to patient health outcomes, transparency requirements related to pharmacy benefit managers and prior authorization requirements for certain high cost drugs.
The opioid epidemic. All states reported using pharmacy benefit management strategies to prevent opioid-related harms. These include adoption of opioid prescribing guidelines, drug utilization review, prior authorization based on clinical criteria and state prescription drug monitoring programs. States also reported a variety of initiatives to expand access to medication assisted treatment (MAT).
Long-term services and supports. Nearly all states in FY 2019 (48 states) and in FY 2020 (47 states) are employing one or more strategies to expand the number of people served in home and community-based settings. Of these states, the vast majority report using HCBS waivers and/or state plan options
Other key highlights include state initiatives to address social determinants of health through managed care contracts and outside of managed care and an array of efforts (through eligibility, benefits and delivery system changes) to help reduce maternal mortality and improve infant birth outcomes.
The survey findings are presented in two reports:
- Medicaid Enrollment & Spending Growth: FY 2019 & 2020
- A View from the States: Key Medicaid Policy Changes – Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2019 and 2020