Spending on Medicaid Outpaces Economic Growth

Medicaid spending is expected to substantially outpace the rate of growth of the United States economy over the next decade, with actuaries at the Centers for Medicare & Medicaid Services (CMS) projecting the bill to reach $4.9 trillion over 10 years.

From 2007 to 2008, Medicaid spending will increase 7.3 percent, reaching $339 billion; the annual average rate of growth projected over the next 10 years is 7.9 percent.

In comparison, the projected growth rate for the economy over that period is 4.8 percent.

Medicaid is a federal/state partnership program that provides health care to certain low-income people. For both federal and state governments, Medicaid accounts for the largest source of general revenue spending on health services. The federal government matches state expenditures based on a formula that yields subsidies ranging from 50 percent to 83 percent. The average is 57 percent.

However, even with federal support, states report they are struggling to meet their share of expanding Medicaid costs. State spending on Medicaid has remained relatively stable as a share of states’ budgets, averaging about 20 percent from 1995 to 2007.

These projections were presented in a report to the Medicare Board of Trustees.