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Medicaid Spending Increased by 10.7% in First Half of 2007

Medicaid spending increased by 10.7% in the first six months of 2007 -- the largest increase since 2001 -- and likely will reach $330 billion this year, according to a USA Today analysis of data from the Bureau of Economic Analysis. USA Today attributed the increased Medicaid spending in part, to:

- Efforts by states to extend health insurance to more residents through Medicaid and SCHIP;

- Increased enrollment in Medicaid after a temporary decrease in 2006 that resulted from implementation of new proof-of-citizenship rules; and

- Increased Medicaid reimbursements for health care providers.

Robert Campbell, vice chair of the accounting and consulting company Deloitte & Touche, said that, because of the increased Medicaid spending, states "are going to have to make some tough decisions on who receives care, what care they get and what the limitations are." In addition, he said that Medicaid spending likely will continue to increase as states seek to extend health insurance to more residents and health care costs continue to increase.

According to USA today, the "Medicaid spending burst may signal the end of a two-year period when costs seemed to be coming under control." Medicaid spending increased by 5.1% in 2005 and decreased by 1.7% in 2006. Medicaid spending "fell last year because a variety of cost controls, such as moving patients from nursing homes to lower-cost home health care, produced unexpectedly large savings" and "Medicaid shifted some costs into the new Medicare prescription drug benefit," USA Today reports (Cauchon, USA Today, 10/8).

State Grants

In related news, HHS last week announced that 16 states and Puerto Rico have received almost $52 million in Medicaid "transformation" grants to study and develop revisions to their programs, CQ HealthBeat reports. Congress approved $150 million for the grants, which HHS will distribute in 2007 and 2008, as part of the 2005 Deficit Reduction Act, which President Bush signed into law in 2006. In January, 26 states received $98 million in grants, HHS said.

HHS Secretary Michael Leavitt said, "These transformation grants express the core goal of this administration to give states the kind of flexibility they need to deliver high quality care in an efficient and more economical way" (CQ HealthBeat, 10/5).



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