“The cost of Medicaid, like most health expenditures, historically increased at a rate significantly faster than the overall rate of U.S. economic growth, as measured by gross domestic product. In the past, much of Medicaid’s expenditure growth has been due to federal or state expansions of Medicaid eligibility criteria, such as the ACA Medicaid expansion.
“Medicaid expenditures are influenced by economic, demographic, and programmatic factors. Economic factors include health care prices, unemployment rates (see the “Medicaid Enrollment” section for a discussion of the impact of the unemployment rate on Medicaid enrollment, which also impacts expenditures), and individuals’ wages. Demographic factors include population growth and the age distribution of the population. Programmatic factors include state decisions regarding optional eligibility groups, optional services, and provider payment rates. Other factors include the number of eligible individuals who enroll, utilization of covered services, and enrollment in other health insurance programs (including Medicare and private health insurance).
“Figure 5 shows actual Medicaid expenditures from FY1997 to FY2017 and projected Medicaid expenditures from FY2018 through FY2026. These figures are broken down by state and federal expenditures. In FY2018, Medicaid spending on services and administrative activities in the 50 states, the District of Columbia, and the territories totaled $616 billion.57 Medicaid expenditures are estimated to grow to $1,006 billion in FY2026.58
“Historically, in a typical year, the average federal share of Medicaid expenditures was about 57%, which means the average state share was about 43%. However, the federal government’s share of Medicaid expenditures increased with the implementation of the ACA Medicaid expansion, because the federal government is funding a vast majority of the cost of the expansion through the enhanced federal matching rates.59 In FY2018, the average federal share of Medicaid is estimated to have been 62%, and it is expected to remain at that level through FY2026.60
“With the implementation of the ACA Medicaid expansion in 2014, Medicaid expenditures increased 8.4% in FY2014 and 11.6% in FY2015.61 But since then, Medicaid expenditure growth has slowed; some reasons for this include slowing enrollment growth and managed care payment recoveries.62 However, the rate of growth for Medicaid expenditures is expected to increase starting in 2019 due in part to additional states implementing the ACA Medicaid expansion and price factors.63 This growth is expected to be somewhat offset by the reductions to Medicaid DSH allotments.64“
Source: U.S. Congressional Research Service. Medicaid: An Overview (R43357; June 24, 2019). https://crsreports.congress.gov/product/pdf/R/R43357
