In fiscal year 2008 Medicaid enrollment rose by 2.1% nationwide, and state Medicaid spending increased 5.3%, according to a recent survey of state Medicaid directors by the Kaiser Commission on the Uninsured. The growth in enrollment erased the slight decline in fiscal year 2007. State spending reflects a significant increase over the previous two years. For fiscal year 2009, states expect to see even larger increases in Medicaid enrollment and spending—3.5% and 5.8%, respectively.

Medicaid directors largely attributed the 2008 increases in enrollment and spending to a weakened economic outlook. Thirty states confronted significant budget shortfalls as they prepared their fiscal year 2009 budgets. Despite the shortfalls, few states have moved to cut Medicaid programs in their 2009 budgets, the survey found, but midyear changes to control costs, such as cuts in eligibility and outreach efforts, may result from the worsening financial picture. This pattern is similar to what occurred at the start of the last economic downturn from 2001 to 2004, when states did not immediately implement widespread actions to cut Medicaid but made significant cuts later.

The eighth annual budget survey of state officials was conducted by researchers from the Kaiser Foundation and Health Management Associates. The researchers also gathered state-level data about fiscal year 2008 restorations, enhancements, and expansions to state Medicaid programs, which were also factors in the enrollment and spending increases. These include changes in provider reimbursement levels, Medicaid eligibility requirements and enrollment processes, benefits, and home- and community-based services for long-term care. The changes reflect efforts that began during the favorable economic climate in 2007, as states prepared their fiscal year 2008 budgets. Most states covered similar efforts in their fiscal year 2009 budgets, but expansions were fewer and smaller in scope.

Most states reported continuing problems related to the implementation of new requirements for Medicaid enrollees and applicants to document their citizenship and identity, as required by the Deficit Reduction Act of 2005. Thirty states reported that these requirements significantly increased the time needed to determine eligibility, 24 states reported increased backlogs of applications, and 22 states reported an increase in the number of application denials.

In fiscal year 2008 a third of states expanded their managed care programs. The most significant trends involved including people with disabilities in managed care, expanding managed care service areas, and requiring enrollment in managed care when it had previously been voluntary. A number of states reported that they limited their expansion of coverage of children because of new federal State Children's Health Insurance Program requirements and the uncertainty of ongoing funding; Congress has reauthorized the program only through March 2009.

The 107-page survey report, Headed for a Crunch: An Update on Medicaid Spending, Coverage and Policy Heading Into an Economic Downturn, is available on the Kaiser Web site at www.kff.org/medicaid.