States prep for Medicaid enrollment declines, cost spike

State Medicaid officials across the country are preparing for steep enrollment declines, slower Medicaid spending growth and a sharp rise in states’ share of costs with the anticipated end of the COVID-19 public health emergency early next year, according to two reports released Tuesday by KFF, a nonprofit organization focused on national health issues.

The reports, based on the organization’s annual survey of Medicaid enrollment and spending trends, also found that the pandemic has shaped states’ Medicaid policy priorities to include focuses on reducing disparities, preserving telehealth, and boosting access to behavioral health services.

Forty-nine states responded to the survey, although response rates for specific questions varied.

As part of a package passed in the early days of the pandemic, Congress provided a 6.2% increase in the federal Medicaid match rate for states that meet certain eligibility requirements. The requirements included a provision that required states to provide continuous coverage for Medicaid enrollees until the end of the month in which the COVID public health emergency is declared over.

The continuous enrollment requirement is credited with driving Medicaid enrollment to record highs and has contributed to declines in the uninsured rates. It has also contributed to increases in Medicaid spending, although the federal fiscal relief met or exceeded the state costs of the additional enrollment through the 2022 federal fiscal year in every state, the Kaiser survey found.

Most state Medicaid agencies that responded to the survey had assumed that the fiscal relief and continuous enrollment requirement would end by December 31, 2022. But the public health emergency was recently extended to mid-January 2023, somewhat delaying the anticipated effects and contributing to uncertainty among Medicaid officials that has made it more difficult to plan for the effect on state budgets.

New Mexico Health and Human Services Secretary David Scrase said last month he’s preparing for up to 100,000 people to no longer qualify for Medicaid coverage in his state.

“We knew this would be coming some day and now it is becoming a part of our budget,” Scrase said, according to the Associated Press.

KFF’s 22nd annual survey of state Medicaid directors found that states expect growth in Medicaid enrollment to slow to 8.4% in FY 2022, down from 11.2% the previous year, before declining by 0.4% in FY 2023.

The survey also finds that total Medicaid spending growth – federal and state spending combined – is expected to peak at 12.5% in FY 2022, before slowing to 4.2% in FY 2023. State Medicaid officials reported that the state share of Medicaid spending grew by 9.9% in FY 2022. They projected sharper state spending growth of 16.3% in FY 2023 with the federal government expected to end its temporary enhanced funding.

Other factors contributing to increased Medicaid spending reported by state agencies included inflationary pressures, increased service utilization, and increased home and community-based service spending.

While states continue to respond to pandemic-related health issues such as increasing vaccination and booster rates and treating long-COVID, states also reported actions to focus on longstanding issues and new priorities including improving equity and reducing health disparities, maintaining access to telehealth, improving behavioral health access and supports, and addressing workforce challenges, the survey found.

States are also facing future fiscal uncertainty due to slower revenue growth projections, workforce shortages and the potential shifts in political landscapes. Thirty-six states are holding elections for governor next month that could have implications for state Medicaid policies and for Medicaid enrollees.