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States shift LTC toward community-based settings with Medicaid spending set to jump in FY2012

October 28, 2011
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In anticipation of a projected 28.7 percent increase in state Medicaid expenditures next year, many states have enacted cost-cutting measures, including moving long-term care toward community-based models, according to a new survey by the Kaiser Family Foundation.

“The substantial but temporary increase in the federal share of Medicaid spending under the American Recovery and Reinvestment Act (ARRA) brought about the only declines in state spending on Medicaid in the program’s history in fiscal years 2009 and 2010, even as the deep recession sharply increased Medicaid enrollment and overall Medicaid spending during that period,” according to Kaiser Family Foundation.

“With that money having expired in June 2011, however, states must ramp up their own spending to replace the lost funds, even though states project total spending in the Medicaid program—which is jointly financed by the federal government and the states—to increase on average by a modest 2.2 percent this year.”

The Foundation’s 11th annual 50-state Medicaid budget survey captured states’ cost containment actions as well as efforts to make their programs more efficient, which included increasing their reliance on Medicaid managed care and shifting long-term care toward community-based models, according to the survey’s findings.

Despite the reported changes, “Medicaid officials in more than half the states estimate at least a 50-50 chance that they will see a budget shortfall this fiscal year as enrollment continues to grow,” the survey found.

“Unemployment remains high with increasing numbers of poor and uninsured keeping pressure on state budgets and Medicaid programs to meet growing needs,” said Diane Rowland, Executive Vice President of the Kaiser Family Foundation. “But the cumulative effect of two recessions since 2001 and a decade of constrained spending has left no cushion and many of the latest cuts will hit at the core of the Medicaid program.”

Among cost-containment strategies, the most common was provider rate restrictions, with 39 states restricting rates in 2011 and 46 reporting plans to do so in 2012. But some states also increased or imposed new provider taxes that can generate more federal matching revenue and help mitigate the effects of cuts to some providers, according to Kaiser Family Foundation.

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