Medicaid spending and enrollment slowed “substantially” in fiscal year (FY) 2012, and state policymakers and health care advocates were cautiously optimistic that the United States may finally be digging itself out of the Great Recession, the Kaiser Family Foundation said Thursday.

“Cost containment remained a strong focus for Medicaid, but with small improvements in the economy, a number of states were able to make some targeted program improvements, including continued expansions of community-based long term care options,” Kaiser said in announcing the results of its 12th annual budget survey of the 50 states and the District of Columbia.

Overall, the average Medicaid spending increased by about 2 percent, “a near record low,” Kaiser said.

Health care providers were most likely to suffer under the new austerity, though, Kaiser found. Forty-five states restricted provider rates in fiscal 2012, and another 42 said they were planning to cut rates in FY 2013, Kaiser said.

These cuts came just as an increasing number of states—29 in FY 2012 and 34 in FY 2013—expanded or were planning to expand their long term care “options,” mostly through home- and community-based services, Kaiser said.

Medicaid enrollment growth was 3.2 percent in fiscal 2012, the lowest enrollment growth since fiscal 2008, when the economy collapsed. States helped slow growth with “intense state efforts to mitigate” spending when federal stimulus money dried up in calendar year 2011, Kaiser said.

“From October 2008 through June 2011, states received about $100 billion in federal fiscal relief from [the American Recovery and Reinvestment Act] in the form of an enhanced federal match rate for Medicaid,” Kaiser said. “The ARRA-enhanced federal matching rates … reduced the costs for Medicaid by increasing the federal share.”

As a result, state spending on Medicaid under the stimulus fell on average by nearly 11 percent in FY 2009 and another nearly 5 percent in FY 2010, Kaiser said. Once the stimulus cash was gone, though, state Medicaid spending jumped by 27.5 percent, Kaiser said.

State leaders told Kaiser and Health Management Associates surveyors that Medicaid spending and enrollment growth would be “relatively slow” through FY 2013, Kaiser said Thursday.
On average, the states’ and the District’s legislatures authorized 3.8 percent growth in Medicaid spending for FY 2013, “one of the three lowest rates of growth in total Medicaid spending in the past 15 years,” Kaiser said. Ten states budgeted for declines in spending, Kaiser said.

Nearly one-third of states said they were worried about Medicaid budget gaps going into 2013, but almost half of the states had those same worries in FY 2012, Kaiser said.

State officials expected their Medicaid rolls to grow even slower in FY 2013, with an average growth rate of 2.7 percent. Ten states budgeted for falling Medicaid enrollment, Kaiser said.

Despite the relatively good news in enrollment and spending, next month’s elections are a big question mark for policymakers, Kaiser said. States are already wrestling with whether to accept expanded Medicaid dollars—and regulation—under President Obama’s health care reforms; the post-election, lame-duck session of Congress could also bring further cuts to federal spending, Kaiser said.