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Posted to Web: May 01, 2002

Permanent Link: http://www.urban.org/url.cfm?ID=1000319

This issue paper examines several factors behind the recent acceleration of Medicaid spending, many of which also underlie a more general rise in health care costs and private health insurance premiums. The authors also discuss reasons why Medicaid spending growth appears likely to remain at higher levels for the foreseeable future. Factors identified as contributing to current and/or projected growth include rising Medicaid enrollment, rapid growth of pharmacy costs, escalating costs for providers—including hospitals, managed care plans, and nursing facilities—and states’ mounting use of upper payment limit financing arrangements. The authors conclude that acceleration of Medicaid spending growth is a serious concern for states and the federal government given current economic and budget circumstances, and suggest that a restructuring of Medicaid financing may be necessary if Medicaid is to continue to provide for low-income populations as well as to expand to reach more of the uninsured. (Published by the Kaiser Commission on Medicaid and the Uninsured; 2002 May.)

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