Medicaid Directors Project 12.5% Total Medicaid Spending Growth in FY 2022

Medicaid directors identified enrollment and the end of flexibilities tied to the public health emergency as major influences on Medicaid spending, according to a report compiled by Health Management Associations and published by Kaiser Family Foundation.

Health Management Associations surveyed Medicaid directors across every state plus the District of Columbia from June 2022 to October 2022. Only Georgia and Arkansas did not respond. The company acquired Medicaid spending, enrollment, and policies.

“Almost two-thirds of responding states assumed the enhanced FMAP would end December 31, 2022, though nearly one-third assumed an earlier end date,” the report explained. “The spike in state spending growth expected in FY 2023 reflects these assumptions.”

Medicaid enrollment growth slowed to 8.4 percent in 2022 and Medicaid directors expected that it would continue to drop in the next year. Respondents projected that the public health emergency and maintenance of eligibility would contribute to this downward slope in enrollment.

After declining in fiscal years 2018 and 2019 and remaining flat in 2020, Medicaid enrollment’s 11.2 percent growth rate in fiscal year 2021 and 8.4 percent growth rate the year after that was considered a symptom of the maintenance of eligibility requirement.

Around half of states said that the maintenance of eligibility requirement would continue to influence the enrollment growth rate at least halfway through 2023, but nearly three-quarters of the states added that the end of the public health emergency and maintenance of eligibility would also contribute to downward pressure on enrollment.

Employment and overall state economics are also factors in Medicaid enrollment. In fiscal year 2022, states saw improved economic environments lead to a de-escalation of Medicaid enrollment.

Most states responded that they planned to pursue policies that would expand eligibility, particularly for postpartum coverage extensions. This could contribute to higher enrollment.

These fluctuations in enrollment growth are expected to have an impact on Medicaid spending.

Medicaid directors projected that total Medicaid spending growth would peak in fiscal year 2022 and then plummet in fiscal year 2023. Total Medicaid spending growth is expected to hit a 12.5 percent growth rate in 2022. Afterwards, it will decline to a 4.2 percent growth rate.

In contrast, state Medicaid spending may balloon in 2023. In fiscal year 2022, states reported that Medicaid spending hit 9.9 percent growth. The respondents projected that this would escalate to 16.3 percent in fiscal year 2023, if the fiscal relief ends midyear in fiscal year 2023.

State Medicaid directors noted that the unwinding process itself might delay the impact of the end of the public health emergency.

“About half of states cited enrollment as an upward pressure at least for part of the year, with some noting they expect enrollment levels to remain high as they take the maximum allotted time to process renewals following the end of the PHE,” the report stated.

Other factors that could influence fiscal year 2022 Medicaid spending in addition to enrollment growth rates included managed care and provider rate increases, higher utilization, and higher home and community-based services spending. In fiscal year 2023, provider rates and cost increases, inflation and home and community-based services spending were expected to drive Medicaid spending.

Despite the uncertain environment and various pressures on spending, Medicaid directors did not expect to see state revenue shortfalls or Medicaid budget cuts.

“While state fiscal conditions have vastly improved since the pandemic began, recent economic developments have raised concerns and heightened uncertainty,” the report concluded. “The PHE end date also remains uncertain and will have significant implications for Medicaid enrollment and spending.”