Costs of Medicaid Soaring by 30% a Year : Health: Study says the increase is due to growing ranks of poor women and children, crack babies, AIDS patients, elderly.
The cost for the federal program that provides health care for the poor has exploded in the last four years and is now rising at 30% a year, according to a report being released today.
The total price tag for the Medicaid program will hit $120 billion in 1992, up from $51.6 billion in 1988, said a report for the Kaiser Family Foundation.
The steep increase was attributed to the growing number of poor women and children who rely on Medicaid and to the soaring numbers of high-cost patients, such as crack babies, AIDS sufferers and the elderly residing in nursing homes.
“Medicaid has become a dumping ground,” said Drew Altman, the former New Jersey commissioner of health services and president of the Kaiser foundation, a California-based health philanthropy that funded the study.
He said Medicaid is the only place states can turn “to finance services after years of cutbacks in federal grants, and the only way we have to meet growing needs, whether the problem is crack, HIV or the needs of the growing, low-income families, and our elderly and disabled populations.”
The solution to rising costs, Altman said, is a “comprehensive health care system that covers all Americans, plus cost controls.”
That recommendation echoes what President-elect Bill Clinton said throughout his campaign. Clinton’s chief health policy adviser, Judith Feder, served as a key author of the Kaiser study.
Although Medicaid has long had a reputation for gobbling up federal and state funds, the study notes that until 1988, the costs for the program actually rose more slowly than other medical spending, mostly because state officials insisted on holding down hospital reimbursement rates.
But since 1988, Congress has required states to offer medical providers a “reasonable and adequate” reimbursement for their services. Moreover, an increasing number of poor women and immigrants are relying on Medicaid to pay for their health care.
The 14-member Kaiser Commission on the Future of Medicaid was set up last year to find out why the program’s costs have been rising so rapidly. Its study found several reasons, including changes in the Medicaid program.
Congress amended the Medicaid law seven times between 1984 and 1990 to encourage states to offer extra health care to pregnant women and their infants. While this move has been widely applauded, it has fueled an increase in Medicaid recipients from 22 million in 1988 to 27 million in 1991.
“If all states were to elect to cover all pregnant women and infants with incomes up to 185% of the poverty level (as authorized by the Medicaid law), close to one-half of all U.S. births would be financed in whole or in part by the Medicaid program,” said the report, entitled, “The Medicaid Cost Explosion: Causes and Consequences.”
The number of elderly and disabled recipients has increased at a slower rate, but those patients are more expensive to treat. For example, it costs $1,086 per year on average to care for a poor child, but $8,524 to pay for hospital or nursing home care for a low-income elderly patient, the study found.
Medicaid is also the avenue of last resort for gravely ill patients who exhaust their other means of paying. The report estimates that “Medicaid pays for 40% of all spending to care for persons with AIDS and represents the single largest source of coverage for persons with AIDS.”
In 1987, Medicaid covered $390 million in costs for AIDS patients. That jumped to $2.1 billion in 1991.
States and the federal government share the cost of the Medicaid program. In California, the state pays half the total cost.
Molly Joel Coye, director of the California Department of Health Services and a member of the Kaiser Commission, said immigration has driven up Medicaid costs for the state, since both documented and undocumented aliens can receive emergency medical services.
The study concluded about one-third of the overall rise in Medicaid is due to general inflation in medical costs.
Altman said states have no way to reduce program costs.
“You can’t throw people off the program,” he said. “This is a safety net. And they can’t stick it to the (medical) providers anymore, because Congress called a halt to that. The only message then is that we need a comprehensive health care system and real cost controls.”
