At this rate, Medicaid growth is projected to slightly exceed growth in overall health care expenditures, which is projected by CMS actuaries and economists to increase by 6.7 percent per year over the next 10 years, or over twice the rate of general inflation. Additionally, Medicaid's share of the Gross Domestic Product (GDP) is projected to reach about three percent in 2017. The combined share of GDP spending for Medicare and Medicaid is projected to be 6.9 percent by 2017.

As a partnership program, both states and the federal government pay for services to Medicaid beneficiaries. The federal government matches state expenditures based on a formula that yields subsidies ranging from 50 percent to as high as 83 percent. The average federal medical assistance percentage is 57 percent.


However, even with federal support, states report they are struggling to meet their share of expanding Medicaid costs. State spending on Medicaid has remained relatively stable as a share of states' budgets, averaging about 20 percent from 1995-2007. However, some states such as Maine are already spending as much as 31 percent of their budgets on Medicaid, according to NASBO.

NASBO is projecting that state spending on Medicaid will increase by 4.4 percent from 2008 to 2009. NASBO says such an increase would be more than four times the rate of growth in the average state general fund.

"High and increasing Medicaid spending clearly leaves states less able to fund other state priorities," said Acting CMS Administrator Kerry Weems. "This new financial report confirms that America's health care system faces significant fiscal challenges.

"As a nation we must tackle the difficult job of bringing health care costs under control and assuring that our health care dollars are buying the highest quality, most efficient health care services."

Other findings from the report include:

* Average Medicaid enrollment is projected to increase 1.8 percent to 50 million people in 2008.
* During the next 10 years, average enrollment is projected to increase at an average annual rate of 1.2 percent and to reach 55.1 million by 2017.
* The estimated average cost of a person covered by Medicaid in 2007 is $6,120; however, per-enrollee spending for non-disabled children ($2,435) and adults ($3,586) was much lower than that for aged ($14,058) and disabled beneficiaries ($14,858), reflecting the differing health status of these groups.
* Medicaid represented 14.8 percent of all health care spending in the United States in 2006.
* Medicaid is projected to grow as a share of the federal budget from 7.0 percent in 2007 to 8.4 percent by 2013.

The full report can be viewed at: http://cms.hhs.gov/ActuarialStudies/03_MedicaidReport.asp.

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