Medicaid Spending Continues to Climb

(October 23, 2008) - Like every other type of healthcare spending, spending by the Medicaid system is expected to grow at a faster rate than either inflation or the economy.

Medicaid is a federal/state partnership program that provides health care to certain low-income people and is one of the largest payers for health care in the United States.

A report from the Centers for Medicare & Medicaid Services (CMS) projects that Medicaid spending will increase 7.3 percent from 2007 to 2008, reaching $339 billion and will grow at an annual average rate of 7.9 percent over the next 10 years, reaching $674 billion by 2017. That compares to a projected rate of growth of 4.8 percent in the general economy.

"If nothing is done to rein in these costs, access to health care for the nation's most vulnerable citizens could be threatened," said HHS Secretary Mike Leavitt.

This growth rate compares to spending projections for Medicare of 7.4 percent per year through 2017. Medicaid spending over the next 10 years is projected to be $4.9 trillion. These amounts are in addition to what is spent by federal and state governments on the State Children's Health Insurance Program (SCHIP).

At this rate, Medicaid growth is projected to slightly exceed growth in overall health care expenditures, which is projected by CMS actuaries and economists to increase by 6.7 percent per year over the next 10 years, or over twice the rate of general inflation. Additionally, Medicaid's share of the Gross Domestic Product (GDP) is projected to reach about three percent in 2017. The combined share of GDP spending for Medicare and Medicaid is projected to be 6.9 percent by 2017.

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