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Low Spending Growth and Improved Economy Allow States to Focus on Program Improvements,
As Well As Cost Control

WASHINGTON, DC - Enrollment in Medicaid declined for the first time in nearly a decade, according to a new 50-state survey released today by the Kaiser Family Foundation's Commission on Medicaid and the Uninsured (KCMU). But faced with an improving economy, 42 states expect to expand coverage to the uninsured in the next year.

The survey reports a 0.5 percent enrollment decline in fiscal year (FY) 2007 driven primarily by two factors. States reported that the new documentation requirements were causing significant delays in processing applications, affecting mostly individuals already eligible for the program. State officials also cited the good economy and lower unemployment for reducing enrollment. After an all-time low for Medicaid spending growth in FY 2006, Medicaid spending continued to grow slowly by 2.9 percent in 2007 due largely to the decline in enrollment and the continued transition of prescription drug costs for dual eligibles from Medicaid to Medicare. States expect enrollment and spending to increase in FY 2008 as they move forward with program enhancements.

"In hard economic times, states are under incredible pressure to restrain Medicaid spending growth, but when fiscal conditions improve, states look to restore some cuts and really focus on improvements. States are turning to Medicaid to address the rising number of uninsured to help fill in the gaps for low-income families," said Diane Rowland, executive vice president of the Kaiser Family Foundation and executive director of KCMU.

The budget survey of state officials, conducted by KCMU and Health Management Associates for the seventh consecutive year, found that this year more states than in previous times were pursuing policies to remove restrictions put in place during poor economic conditions and improve their programs. With the nation's growing uninsured population, 42 states report efforts underway to expand coverage to their uninsured population using Medicaid as a financing vehicle for coverage efforts. Many of these efforts, however, will depend on the outcome of the federal debate on the reauthorization of the State Children's Health Insurance Program (SCHIP) in light of the president's veto.

Medicaid Policy Initiatives for FY 2007 and FY 2008

Unlike their singular focus on cost containment in earlier years, states have moved now to a range of priorities including expanding eligibility and benefits, improving quality, and changing the delivery of long-term care services. All states and the District of Columbia implemented at least one provider payment increase in FY 2007 and almost all (49 states) adopted an increase for FY 2008. More than half of all states for FY 2007 and FY 2008 expanded eligibility, including increases in income limits, new group expansions, or streamlining the application or renewal process. For the first time since FY 2003, no state plans to cut a benefit in FY 2008.

In FY 2007, 35 states expanded long-term care services and 46 states plan to do so in FY 2008. In both years, the most commonly reported expansions were expanding existing home and community based service waivers or adopting new waivers.

To improve care and achieve better value in their Medicaid programs, by FY 2008, 44 states will require health care plans to report performance measures through HEDISR or CAHPSR. Twenty seven states will have pay-for-performance programs providing incentives for programs like tobacco cessation and payments tied to hospital readmission rates for chronic conditions such as asthma and diabetes.

The Impact of the Deficit Reduction Act of 2005

The Deficit Reduction Act (DRA) of 2005 included several changes to federal Medicaid policy, including a new requirement that states obtain documentation to prove citizenship and identity for individuals applying for or renewing Medicaid coverage. Three out of four states reported that the new rules contributed to slower enrollment growth in FY 2007 and caused significant delays in processing applications and increased the administrative burdens placed on states.

To date, seven states have plans approved using new DRA options on benefits and cost sharing. Kentucky, West Virginia and Idaho moved forward with comprehensive redesigns of their Medicaid benefits and four other states (Kansas, Virginia, Washington, and South Carolina) received approval for more targeted flexibility. For FY 2008, Wisconsin intends to seek approval to offer a modified benefits package for an expansion population.

The DRA also provided more state options for flexibility in long-term care. Nearly half (24) of states reported plans to implement a Long-Term Care Partnership Program in FY 2008 to help increase the role of private long-term care insurance. Take up of new state plan options for cash and counseling and the home and community based services option has been more limited.

Medicaid and Health Care Reform

Declines in employer-sponsored coverage continue to swell the ranks of the uninsured, with 47 million uninsured in 2006. States have been at the forefront in seeking ways to decrease the number of uninsured. Forty-two states said they have plans to expand coverage to this population and three indicated that they were having discussions but had not yet made a decision to move forward yet. Thirty-eight of the 42 states reported that Medicaid would have a role in financing their plans while 34 states responded that Medicaid would play a role in enrollment.

Today's released report, As Tough Times Wane, States Act to Improve Medicaid Coverage and Quality: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2007 and 2008, and related materials are available at http://www.kff.org/medicaid/kcmu101007pkg.cfm. In addition, an audio press briefing on the release will be available after 6 p.m. ET today.

Also released today were:

• The brief, Why Did Medicaid Spending Decline in 2006? A Detailed Look at Program Spending and Enrollment, 2000-2006
• The June 2006 data update, Medicaid Enrollment in 50 States
• The updated fact sheet, Medicaid Enrollment and Spending Trends.

For further information, please contact Rakesh Singh at (202) 347-5270 or rsingh@kff.org or Kirran Syed at (202) 347-5270 or ksyed@kff.org.

The Kaiser Commission on Medicaid and the Uninsured provides information and analysis on health care coverage and access for the low-income population, with a special focus on Medicaid's role and coverage of the uninsured. Begun in 1991 and based in the Kaiser Family Foundation's Washington, DC office, the Commission is the largest operating program of the Foundation. The Commission's work is conducted by Foundation staff under the guidance of a bipartisan group of national leaders and experts in health care and public policy. The Kaiser Family Foundation is a non-profit, private operating foundation dedicated to providing information and analysis on health care issues to policymakers, the media, the health care community, and the general public. The Foundation is not associated with Kaiser Permanente or Kaiser Industries.