The number of Minnesotans on Medicaid is growing faster than in most other states, and so is the cost.
The number of Minnesotans on Medicaid shot up at nearly twice the national rate over the past two years, while state costs soared by 40 percent to surpass $4 billion for the first time.
There now are about 733,000 Minnesotans in the state-federal health insurance program for the poor -- called Medical Assistance in Minnesota -- an increase of 125,000 in two years, according to a new federal study.
While the weakened economy explains most of the rising Medicaid rolls in other states, much of Minnesota's increase came when Gov. Mark Dayton expanded the program by 80,000 people last year under an option in the federal Affordable Care Act, the law now facing U.S. Supreme Court scrutiny.
Nationwide, the massive and growing Medicaid budget -- $450 billion this year to care for about one in five Americans -- will place a drag on states as they struggle out of the 2007-09 recession, according to a report issued this week by the National Governors Association and the National Association of State Budget Officers.
Overall, Medicaid is funded with about half state and half federal funds. In Minnesota, the combined state and federal outlays will total about $8.5 billion this year.
But much of the rise in Minnesota's portion of the cost -- from $2.9 billion in 2011 to an estimated $4.05 billion this year -- actually is a shift, state officials said. About a third of the increase resulted from enrollees who transferred into Medicaid and out of programs that were funded solely by the state. The rest resulted from the end of the federal government's economic stimulus package, which for a time raised the federal Medicaid match from about 50 percent to 60 percent.
Climbing Medicaid costs remain "a concern, but not the top concern" facing Minnesota's budget, State Economist Tom Stinson said.
"I'm really more concerned with what's happening to the economies of Europe and our own national economy," Stinson said. "My biggest concern right now is state revenues."
Minnesota also benefited last year from Medicaid costs that came in lower than expected, Stinson said. Care costs for the new people added to the program were lower than predicted, and state officials began negotiating better prices through managed-care contracts that cover most Minnesotans in the program.
"Overall, I'd say we need to continue to look at health care programs and costs, but at least for us, it's not a totally bleak situation," Stinson said.
Program a target
Medicaid was set up by Congress in 1965 to provide health care to low-income adults and children, including some people with disabilities; it also covers about two-thirds of people in nursing homes who have outlived their savings. While low-income families represent the majority of people on Medicaid, most of its outlays go to long-term care for the elderly and disabled. It is administered by states, under federal rules and monitoring.
It also has been a target of Republican lawmakers in Washington and St. Paul in recent years. Under Republican insistence, Minnesota is seeking federal flexibility to reorganize the program, and perhaps ultimately to replace it with vouchers for private health insurance.
Minnesota's program is expected to add another 60,000 people by the end of 2014 with further expansion of the federal Affordable Care Act, although the law's expansion of Medicaid rolls also is under challenge before the Supreme Court.
The law generally will expand Medicaid eligibility in 2014 to cover people with incomes up to 133 percent of poverty, instead of stopping at 100 percent, an attempt to ease problems for about 50 million Americans now lacking health insurance.
But the Medicaid program could be thrown into disarray later this month if the Supreme Court finds that all or part of the federal law is unconstitutional.
"It's an imponderable I don't think about," Stinson said. "The court will do what it decides to do, and the rest of us will deal with it."
A short respite, then ...
Minnesota may have a bit of respite next year with a slight drop in state spending, both the national report and the state forecast estimate.
However the Supreme Court rules, Minnesota and other states will need to keep a sharp eye on their costs, the national report cautioned.
In 2014, Minnesota's Medicaid costs are expected to rise by about 10 percent, surpassing $4.4 billion, while the federal share is forecast to soar 23 percent to $5.1 billion with the program's expansion.
In many states, Medicaid is the largest single portion of state spending, at nearly a quarter of state budgets, and some states are struggling to control costs by cutting provider payments, drug costs and other benefits, the report said,
Despite those efforts and the start of economic recovery, it said, "Medicaid will continue to be a significant fiscal challenge to states."
Warren Wolfe • 612-673-7253