Medicaid Spending Fell By 1.4% In 2006, First Time Costs Declined Since Program Began In 1965, According To Bureau Of Economic Analysis

November 30, 2006 – 2:20 pm | posted in Medicare

Medicaid spending declined by 1.4% in the first nine months of 2006 compared with the same period last year, marking the first decrease in spending since the program was created in 1965, according to the Bureau of Economic Analysis, USA Today reports. After adjusting for the rate of health care inflation, Medicaid spending declined by 5.4% this year, according to the bureau. “Substantial” savings resulted from many small cost-containment policies adopted by states in recent years, USA Today reports. Such policies include shifting elderly beneficiaries from nursing homes into less-costly home health care; tightening restrictions on fraud; refining the management of high-cost beneficiaries, such as those with serious chronic diseases; and reducing some payments to hospitals and doctors. Arizona Medicaid Director Anthony Rodgers said, “States have made really aggressive changes in how care is managed in Medicaid. Every state has taken a different approach, but the success can be seen almost everywhere.” In addition, some of the savings are the result of shifting some medication costs to the Medicare prescription drug benefit. Under the benefit, states must partially reimburse the federal government for money saved. According to USA Today, the “complicated cost shifting between the two programs makes it impossible to know precisely how much Medicaid cost cutting is simply shifting expenses to the federal program.” A USA Today analysis found that without the Medicare drug benefit, Medicaid spending would have been about equal to spending in 2005, or down 4% after adjusting for inflation (Cauchon, USA Today, 11/27). 

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