Medicaid Controls Health Care Costs Better than Other Insurers – Say Ahhh! A Children’s Health Policy Blog

Since 2008, we’ve heard reports about growing Medicaid
enrollment and consequently, a rise in its cost (which was mainly incurred by the federal
government). Of course we now know that the increases in Medicaid
enrollment, and subsequently Medicaid spending, coincided with the worst
economic downturn since the Great Depression.

And by now, Say Ahhh! readers are familiar with our
frequent efforts to get out the facts and to debunk the
myths of out-of-control spending that are promulgated by some. That said, given
the current threat to Medicaid and CHIP by the House-passed Sequester
Replacement Reconciliation Act
, it bears repeating that: 1) the enrollment
increases in Medicaid have been recession driven 2) Medicaid is cost-effective and does a much better
job of controlling health care costs than do other insurers in the health care

Three recent reports, and their accompanying info
graphics, help illustrate these points.

The Kaiser Commission on Medicaid and the Uninsured’s
Enrollment-Driven Expenditure Growth: Medicaid Spending During the Economic
Downturn FFY2007-2010
 reveals that the 2.5 percent average annual
spending growth in Medicaid is slower than per capita costs in national health
expenditures, Medicare, and the private health sector.  With 5.5 percent average annual growth
spending, the private sector outpaces all benchmarks with which it is compared
and even doubles Medicaid spending. 

Thumbnail image for Urban.jpg

Urban Institute’s analysis in Medicare, Medicaid and the
Deficit Reduction, illustrates that Medicaid per capita expenditures on average were lower than the private sector throughout the last
decade.  Compare the private
sector’s 9.1% growth in the first half of last decade and 4.5% growth in the
latter half of the decade to Medicaid’s per capita growth rates of 2.9% and
2.7%, respectively.  Authors
Holahan and McMorrow note that Medicaid’s lower costs are due to the fact that
more enrollment was seen among adults and children than the aged and disabled,
as the latter group costs more money. 
However, continued growth of the disabled population in the program, is
one reason for overall expenditure growth.  That is of course, in addition to the two economic
recessions experienced in the last decade, during which times, enrollment

Thumbnail image for fig2.jpgThumbnail image for fig7.jpgFinally,an  analysis from Bloomberg Government finds that Medicaid spending has
been mostly flat for the last decade, after adjusting for inflation and
population growth.  At both the
beginning and the end of last decade, per capital costs average out at about $350,
having hit its highest per capita cost of $400 in 2005. Below, a graph
summarizes spending for the five states with the highest Medicaid expenditures
in comparison to the national

In sum, these recent analyses of Medicaid spending exhibit
that Medicaid is better at controlling health care costs than other insurers,
and increased spending in the program is driven by enrollment.

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