Medicaid Managed Care - U.S. Senate Special Committee on Aging

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The slowdown in spending after 1992 was equally dramatic and occurred in all categories Of enrollees
(Holahan and Liska 1996). At least three factors appear to have contributed to this trend. One is the
limitation on the use of DSH payments as a result of 1991 federal legislation capping them (as well as
restricting the use of other creative financing arrangements). After the rapid growth of earlier years,
DSH payments rose by only 2 percent per year between 1992 and 1995.
A second factor was lower growth in spending per beneficiary. Although difficult to demonstrate, this
change may be attributable in part to higher enrollment in managed care. Many states consider their
managed-care initiatives central to reducing spending growth, but systematic evidence of savings
remains unavailable. <strong>Managed</strong> care cannot be the only factor in moderating spending growth,
especially since spending growth actually slowed more rapidly for elderly and disabled populations
(who were not in managed care) than for low-income families (who were). General declines in
medical price inflation, limits by some states on long-term care spending, and cost shifting to Medicare
probably contributed to the slowdown.
A third factor was slower enrollment growth. 8 An improved economy was probably one factor in
lowering the number of AFDC enrollees and thus lowering the number of <strong>Medicaid</strong> beneficiaries.
Tightened eligibility requirements as part of state welfare reforms probably also contributed, as did the
fact that congressionally driven expansions of eligibility were largely completed. In some cases, slower
enrollment growth results from a trade-off made by policymakers-either an implicit or an explicit
decision to forgo eligibility expansions in exchange for savings. For example, recent state requests for
managed-care waivers have focused more on budget savings than on adding new populations.
Similarly, policymakers may be deciding neither to target more age-income groups for eligibility nor to
focus on outreach to enroll those who are eligible. As described above, policymakers may face even
more difficult trade-offs as a result of welfare reform changes.
Projected Increases in Spending
Projections of spending increases have been a large factor driving legislative initiatives for <strong>Medicaid</strong>
reform. Because new projections are lower than those of a year earlier, the pressure for changes has
subsided somewhat. In January 1997, the Congressional Budget Office forecast an average annual rate
of <strong>Medicaid</strong> spending growth of 7.7 percent for the period 1997 to 2002, a significantly lower estimate
than those made earlier. In a separate analysis, Urban Institute researchers projected a growth rate of
7.5 percent. One contributing factor to these lower growth estimates is a revised assumption that
enrollment growth will be between 1.3 percent and 1.5 percent, roughly half of previous projections. By
contrast, enrollment growth was about 7.9 percent from 1988 to 1992 and 5.3 percent from 1992 to
1995 (CBO 1997; Holahan and Liska 1997; Kaiser Commission 1996b).
' Researchers at the Urban Institute and the Congressional Budget Office show slow enrollment growth (Holahan and
Liska 1996; CBO 1997). By contrast, the Health <strong>Care</strong> Financing Administration's managed-care report shows a slight
absolute decline in enrollment (HCFA 1997). As discussed later in the chapter, <strong>Medicaid</strong> data are often imprecise and
unreliable.
423 Physician Payment Review Commission