A new HHS Office of the Actuary report on Medicaid projected the program's expenditures will increase at an average annual rate of 5.7% over the next decade.
That's faster growth than the gross domestic product (4.1% predicted annual increase). The report warned Medicaid's expenditure growth could strain federal and state budgets as the program is expected to grow from 3.1% of GDP in 2016 to 3.7% in 2026.
HHS forecasted annual per enrollee costs will increase by 4.1% in the same period — slightly slower than 2017, which saw 4.2% growth.
The report analyzed Medicaid trends and provided 10-year projections of expenditures and enrollment under existing law. It found that expenditures increased 2.6% to $592.2 billion in 2017 and average enrollment grew 2.1% to 73.8 million. Most of that growth came from Medicaid expansion states.
Since the Affordable Care Act allowed states to expand Medicaid, the federal-state program has become an even more important safety net for Americans. The ACA allowed states to expand Medicaid coverage to lower-middle-class people, which has provided coverage for about 12.2 million people.
In its report, HHS predicted that Medicaid expansion will continue to drive enrollment numbers and account for 13.3 million beneficiaries by 2026. Medicaid expansion alone will account for $938 billion in expenditures in the 10-year period. More than 90% of that money will come from the federal government.
Another significant shift in Medicaid is states moving the program to managed care organizations. More than three dozen states have implemented Medicaid managed care programs as a way to control costs, lower utilization and improve quality. They've moved more than 74 million Medicaid beneficiaries into a managed care plan. That's 80% of Medicaid's enrollment, and some states have more than 90% of their Medicaid population in managed care plans. The report predicted that states moving Medicaid to managed care organizations will play a major role in the program’s future.
"States have continued to expand the use of managed care to cover aged enrollees and persons with disabilities and to provide for long-term care services through managed care programs. Thus, understanding how the use of managed care in Medicaid will affect future expenditure growth — and how fee-for-service expenditures for acute care and long-term care will also be affected — will be an important consideration for Medicaid programs in the future," according to the report.
In addition to managed care organizations, states have sought other ways to bend the Medicaid cost curve. One avenue is limiting coverage, including creating work requirements for Medicaid expansion recipients.
CMS has made work requirement implementation a priority. Kentucky led the way on the initiative and was joined by three other states in receiving waivers to implement work requirements. A federal judge spiked Kentucky's plan, but the CMS is reviewing comments about the proposal. Eight other states are looking at similar waivers.