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Medicaid Expenditures Increased by 5.3% in 2007, Led By Acute Care Spending Growth

This brief presents analysis of the latest available Medicaid spending and enrollment data to examine recent trends in program enrollment, total spending, spending by service, and spending per enrollee. The focus is on spending changes between 2006 and 2007, with historical context also provided.

After Medicaid spending declined in 2006 for the first time in the program’s history, spending climbed by 5.3 percent in 2007. In raw dollars, spending increased to $330.8 billion in 2007, up from $314.2 billion the year before. Main contributors to this growth included increases in spending on hospital inpatient care, Medicaid managed care and hospital outpatient care, with particularly large increases in a small number of states driving the overall trend.

Medicaid spending grew between 2006 and 2007 despite enrollment declines of 0.6 percent, defying historical patterns in which growth in Medicaid spending had been driven primarily by enrollment growth. In 2007, spending growth was related not to enrollment growth but rather to increases in the growth rate of spending per enrollee, particularly for acute care services. The current economic recession, however, suggests that Medicaid spending is likely to revert to historical patterns and grow along with enrollment increases.

Over the entire 2000 to 2007 period, annual growth in Medicaid spending per enrollee was considerably slower (4.8%) than growth in per capita national health expenditures (6.5%).

Issue Brief (.pdf)