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Office of the Actuary Projections of Medicaid Costs

By July 14, 2015Commentary

The good news just keeps coming for the “reform” law, the latest in the form of the regular report on the Center for Medicare and Medicaid Services Office of Actuary on the Medicaid program’s financial outlook.  (OA Report)   In 2013 about 60 million people were covered by Medicaid (this is an average, people come in and out of coverage during a year and around 72 million had coverage at least part of a year) at a total cost of $457.8 billion, 58% of which was borne by the Federal government.  Per enrollee spending was about $6900 for the year, with disabled and aged beneficiaries accounting for a disproportionate amount of that.  In 2014, the Office estimates the number of people covered rose to 64.6 million at a cost of $499 billion, with 60% covered by the federal government, which is bearing the vast majority of the expenditures on the newly insured.  In ten years the program is projected to cost $835 billion, or 6.2% average annual growth, probably at least double the likely GDP growth over that time.

Per enrollee health spending is growing more rapidly under the expansion than it was before, but when you give people unlimited free health care, you should have expected that.  The states have reached the limit of their ability to squeeze provider payments and still maintain access.  And part of the per enrollee cost growth is driven by the newly eligible, whom the report found to have spending 19% higher than the non-newly eligible.  Please note that in earlier projections their costs were estimated to be 1% lower, so another case where reality catches up to projections.  Eventually the states will become almost completely responsible for the costs of the newly eligible Medicaid population under the federal health law.  Fear of these costs is one reason why some states did not participate in the expansion, wisely as it may turn out.  For the other states, Medicaid is already their biggest budget nightmare and the trends projected by the Office of the Actuary aren’t going to provide any comfort to them.  So lets see, the exchanges don’t cover as many people as projected and the cost of health care coverage through those exchanges didn’t decline as claimed, in fact it is now rising quite rapidly; for people in employer-based plans, premium and cost sharing continues to increase far faster than income growth; and Medicaid expenditures are going to overwhelm the states.  Unless I am missing something I would say the “reform” law is exactly the resounding success President Obama claims it is.

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