Health Care Drivers for Increased Research Paper

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All spending includes state and federal expenditures. Growth figures reflect increases in benefit payments and disproportionate share hospital payments; growth figures do not include administrative costs, accounting adjustments, or costs for the U.S. Territories.


Federal Fiscal Year: Unless otherwise noted, years preceded by "FY" on refer to the Federal Fiscal Year, which runs from October 1 through September 30.  for example, FY 2009 refers to the period from October 1, 2008 through September 30, 2009.


Urban Institute estimates based on data from CMS (Form 64) (as of 12/21/11).

From this entire chart, the entire increase in expenditure of Medicare was the most from the year 1990-2001. For United States, the entire increase was 10.9% in those years. Comparatively, the increase that occurred in the year 2007-2010 was only 6.8%. Even though the magnitude of growth was not the same, more or less Medicaid did have to increase its spending though out these years.

This graph basically gives a general idea of how Medicaid expenditure has grown exponentially ever since it started. Details of its expenditure trends will be discussed more below.

This graph was basically provided by the Washington Post. It shows how states are allotting more of their funds to health care as oppose to spending on education in the long run. As it will be discussed below, spending by Medicaid increased from 2010 to 2012 due to decreased federal funds. Future trends will be emphasized below.


It should be noted that when Medicaid started, it went off in the pattern that most of the state-based programs go on. By 1971, the annual pending had reached about 6.5 billion where as the enrollment was about 16 million people. (Klemm 106) the enrollment growth and the coverage that the program would provide were underestimated to quite an extent. Therefore, this led to a rapid increase in the spending by the program. At that time, the total expenditure was about 52.3. In the period from 1972-176, the entire expenditure was about 17.9%. These expenditures were basically as a result of the amendments that were made to the social security act. The 1972 amendment therefore created the supplemental security income. This federalized the cash assist programs for the disabled and the aged. These amendments also led to most of the beneficiaries of the SSI to attain Medicaid as well. This caused the enrollment in the aged and elderly category to increase about 8% during that year. The time period from late 1970 to 198s was marked by medical inflation. (Klemm 107) This was a result of economy wide inflation and even higher medical costs. The inflation rose to about 8.4% during this time. Even though, there was no relevant expansion of the service, it was seen that other welfare programs were declining. Due to the increasing inflation, the Medicaid enrollment actually dropped by an average of 0.7.

Following this era, in the era of retrenchment, the congress and the federal government offered the option to state for reimbursing Medicaid benefits and for creating their own options. This allowed the states to take a break from the growing expenditures of Medicaid. This occurred mainly because the federal government had cut down the amount it would provide to the state. Thus, in order to help states with the reductions, the federal government offered these propositions. It was during this time that health maintenance organizations and other programs of the community were made. Medicaid started to alter its objective from paying claims to going for managing services and the cost of care as well. Following this era, the cost of Medicaid augmented annually at an average rate of 8% between 1981 and 1984.

Following that era, the congress basically focused on expanding the Medicaid more and more. This expansion went on to make an impact on enrollments from infants to pregnant women and to low income beneficiaries. During this period, there was also the enactment of pieces of legislation that went on to later affect the eligibility, coverage and reimbursement of Medicaid. (Klemm 109)

The time period from 1991 to 1992 was quite heavy on Medicaid. This mainly occurred due to previous mandates, increasing recession and increasing caseloads on the program. Thus, due to the change in policies and amendments, the strain on the program increased to such an extent that the average annual spending increased about 27% during this era. (Klemm 110) Following the explosion of the early nineties, Medicaid had gone to be altered in many reforms for the years ahead. The welfare reform not only occurred in the medical sector but the economy as a whole prospered during these years. This led to a drop of 0.4% per year in Medicaid spending.

Now we would take a jump to the current year and the statistics that Medicaid presents with today. The annual growth in spending on the program has slowed down significantly since the last year as the economy began to improve. (Goodnough) with the Affordable care act, more people will be eligible in 2014 as well. Goodnough feels that a major reason for increased expenditure on part of Medicaid was because of the shifting situation of the economy. When Americans lost their job and health insurance, Medicaid itself had more and more enrollment. This led to increased costs for the program.

However, last year in June, the total spending on Medicaid only augmented by 2%. (Goodnough) This is very less compared to the 10% increase that occurred in 2011. Many attribute this slowdown to not only more enrollment growth but also due to the cost cutting that many states have carried out. Diane Rowland, who is the executive vise president of the Kaiser Family Foundation, stated that the major reason for the decreasing spending is due to the reining in costs.

The major cuts that were made were to reimbursement rates for hospitals and doctors. Also optional benefits like vision, dental and drug coverage was also cut down. (Goodnough) Out of fifty, about fort five states froze reimbursement rates the previous year. Similarly, many cut back on the benefits that it provided to the masses. The previous year, Medicaid spending increased about 27.5% since the extra federal Medicaid fund stopped coming. This in turn did put a lot of pressure on the state which caused it to cut down its cost as well. Thus, we should see that this is more of a viscous cycle that occurs. When the government stops giving funds to the state, the state cuts down some of the benefits and reimburses some of the funds. This in turn decreases the spending of the state and the entire Medicaid program for that matter. Therefore, it should be seen that the Medicaid spending over the years has not only been dependant on the inflow of enrollments but on the legislature and the policies that have been created overtime. Along with the aforementioned factors, it is obvious that the current state of the economy and the way other health programs are going will also have an impact on the spending.


The analysis and conclusion that we came up with are subject to a number of limitations. Medicaid as a program has been applied differently in different states in the United States. As mentioned in the discussion, the Reagan administration allowed states to set their own rules for how much they want to cover and their own eligibility criteria. This therefore renders it difficult for us to assess the cost and apply these assessments to the entire Medicaid program. Medicaid program is split into different areas and thus one major conclusion will not be quite accurate. Furthermore, there have been changes in health care technology, drugs and further environment and social changes that have affected the general population as well. In simpler terms, it means that the funding alterations cannot be solely accredited to the policy changes or the changing political ideologies.



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