State Medicaid spending is projected to rise 28.7 percent this fiscal year to make up for the loss of enhanced federal matching payments, which had bolstered the program for over two years, from October 2008 through June 2011, according to a new report from the Kaiser Commission on Medicaid and the Uninsured.

With the expiration of funding from the American Recovery and Reinvestment Act, or stimulus package, which had buoyed state Medicaid programs during the economic crisis, states are turning to provider payments for cuts that will offset the spike in states’ share of the expenditure, Kaiser reported.

Nursing facilities rates are in the eye of the storm, with a total of 30 states reporting restricted rates for these providers in fiscal year 2011. Twenty-four states froze rates and six states cut them, said the 136-page report on Medicaid spending, coverage, and policy trends, based on a survey of all 50 states.

The trend continues in fiscal year 2012, with 17 states planning to freeze nursing facility rates and 14 planning rate cuts, the report said.

Providers are particularly vulnerable to Medicaid rate cuts during a budget crisis, because “rate changes have an immediate impact on state budgets,” Kaiser said.

While states are beginning to see positive signs of economic recovery, they continue to experience “the impact of the worst economic downturn since the Great Depression,” Kaiser reported.

States continue to seek additional authority and flexibility to manage their Medicaid programs, as reflected in a Sept. 22 letter from the National Association of Medicaid Directors (NAMD) to the Joint Select Committee on Deficit Reduction, or so-called “super committee.”

The letter urged lawmakers to give states unfettered authority to enroll any beneficiary population into managed care, without first seeking a waiver or “special permission” from CMS, calling such a move “one of the most important changes Congress could make.”

The dually eligible population, which NAMD said “represents an unnecessarily high proportion of state health care costs,“ stands to benefit the most from improved management and coordination of services, yet statutory, regulatory, and financial barriers have impeded these very changes.