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As pandemic-era federal funding support winds down, state Medicaid directors said in a survey that they anticipate their share of the costs to increase even as enrollment declines.
During the pandemic, the federal government pumped $90 billion into Medicaid to expand coverage and barred states from removing people from the health care program. Now that the public health emergency has ended and that extra federal funding is winding down, states are anticipating their Medicaid expenses to climb steeply, a survey of state Medicaid directors found.
Medicaid agencies reported that state spending grew by 13% this year and is projected to increase by 17.2% in fiscal year 2024, according to a KFF report released Tuesday. The report reflects survey responses from state Medicaid directors in 48 states, including the District of Columbia. Three states—Florida, Minnesota and South Carolina—did not participate.
“State spending on Medicaid declined during the first two years of the pandemic due to the enhanced federal funding,” Liz Williams, senior policy analyst at KFF’s Program on Medicaid and the Uninsured, said during a webinar this week on the report.
The growth in state spending “is a big jump, but it’s not fully unanticipated,” added Robin Rudowitz, KFF vice president and director of the Program on Medicaid and the Uninsured.
States were always aware that the enhanced federal funding for Medicaid was temporary, she told Route Fifty, so officials planned to accommodate that change in their annual budgets. States that used pandemic-era federal aid to bolster their rainy day funds, for instance, could leverage those reserves for their state Medicaid spending, she said.
More than half of state Medicaid directors reported “favorable” fiscal conditions with no expected state revenue shortfalls or budget cuts underway, according to the report. But state officials are concerned that inflation, changes in consumer consumption and workforce challenges like staffing shortages could affect their Medicaid budgeting.
“Increases in state spending [for Medicaid] come at a time when states are starting to experience some uncertainty in their fiscal outlook after somewhat strong fiscal conditions in recent years,” Williams said.
Despite the projected increase in state spending, the KFF report estimates that total spending on Medicaid, including federal funds, will fall more next year than in 2023. Total spending growth in 2024 is projected to slow to 3.4%, down from 8.3% in 2023 and 9.8% in 2022.
Also on the decline are Medicaid enrollment rates, which have been falling off since 2022. This year, enrollment growth slowed to 6.5%, down from 8.4% in 2022. KFF projects that enrollment will decline by an additional 8.6% in 2024.
And while typically “total spending and state spending move together,” Rudowitz said, federal fiscal aid can disrupt that balance, as it did with Medicaid. While the decline in Medicaid enrollment is creating a difference in total and state spending, “it will stabilize as time goes on.”
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