After sharp growth since 2020, state Medicaid agencies expect Medicaid enrollment to begin declining in FY 2023, after the public health emergency (PHE) COVID-19 that most states assumed would occur has passed in FY 2023, according to KFF’s new State of Medicaid Budget Study.
Projected enrollment declines related to the end of the federal continuous enrollment requirement are also expected to translate into slower overall growth in Medicaid spending in FY 2023. At the same time, the loss of a temporarily boosted pandemic-era federal matching funding is expected to rebalance the mix of federal and state spending, increasing state spending, although overall Medicaid spending growth is expected to slow. Medicaid officials reported that the uncertainty surrounding the end of PHE is making it difficult for states to plan for the unwinding of PHE and develop state budgets.
The 22nd Annual Survey of State Medicaid Directors finds that states expect Medicaid enrollment growth to slow to 8.4 percent in FY 2022 (down from 11.2 percent the previous year), before declining to 0 .4 percent in FY 2023.
Enrollment declines are likely to accelerate over time because many states expected the public health emergency and the requirement for continuous coverage to be in effect until the end of this calendar year, in the middle of fiscal year 2023 for most states. The Biden administration recently announced that PHE would continue until mid-January and promised to give states 60 days notice before ending the emergency declaration.
The study also found that overall growth in Medicaid spending — federal and state spending combined — is expected to peak at 12.5 percent in FY 2022 before slowing to 4.2 percent in FY 2023. Employees of state Medicaid reported that the state (non-federal) share of Medicaid spending grew 9.9 percent in FY 2022. They projected a sharper increase in state spending of 16.3 percent in FY 2023, with the federal government expects to end its temporary increased funding.
In addition to enrollment growth, other drivers of increased Medicaid spending reported by state Medicaid agencies include inflationary pressures, increased utilization of services, and increased spending on home and community services (HCBS).
The survey, conducted by analysts at KFF and Health Management Associates, provides an annual look at Medicaid enrollment and spending trends, currently for state fiscal years 2022 and 2023. Forty-nine states responded to the survey, although response rates for specific questions varied . An accompanying research report offers an in-depth, state-specific examination of current policies in state Medicaid programs, as well as important changes and initiatives occurring across the country.
As states continue to respond to pandemic-related health issues, such as increasing vaccination and revaccination rates and treating prolonged COVID, states also reported actions to focus on long-standing issues and new priorities, including improving equity and reducing health care disparities , maintaining access to telehealth, improving access and support for behavioral health, and addressing workforce challenges.
Some notable findings from the report include:
- Health equity. Advancing health equity is an important long-standing priority that has been elevated during the pandemic. Two-thirds of states reported using at least one strategy to improve completeness of race, ethnicity, and language (REL) data. About a quarter of states reported using financial incentives related to health equity, mostly in Medicaid managed care arrangements.
- Benefits: States report far more benefit increases than benefit cuts in both FY 2022 and FY 2023. States are particularly focused on expanding services across the behavioral health care continuum, as well as expanding pregnancy services and after birth. Other areas of benefit expansion include preventive services, dental services, and services to meet the social needs of enrollees (such as food and housing needs).
- Telehealth. States noted that expanded telehealth policies increased access to care during the COVID-19 pandemic and led to high telehealth use among the population. Most states have implemented or are planning initiatives to assess telehealth quality and to address other challenges in telehealth (including access to technology and broadband, program integrity, outreach and education, and equity). Most states have or plan to adopt permanent extensions to the Medicaid telehealth policy that will remain in place even after the pandemic, although some are considering adding restrictions or guardrails.
- Managed care. More than three-quarters of states that contract with managed care organizations (MCOs) reported that 75 percent or more of their Medicaid beneficiaries were enrolled in MCOs as of July 1, 2022. In FY 2022, North Carolina met its first MCO program. Missouri enrolled all ACA expansion adults in Medicaid MCOs when it implemented the ACA Medicaid expansion in October 2021.
- Provider Rates. Provider rate increases exceeded fee-for-service rate caps in FY 2022 and FY 2023. Increases were more common for nursing home and home and community service (HCBS) providers than for other provider categories. Although most states rely on capital agreements with managed care organizations to provide Medicaid services, fee-for-service rates remain important indicators of managed care payments. Many states have noted that worsening inflation and labor shortages leading to higher labor costs are putting upward pressure on rates. Some states noted that the enacted budgets for FY 2023 do not account for current inflation rates, although inflation remains a concern.
- Look forward. States are bracing for challenges related to the elimination of continuous enrollment requirements and the expiration of other emergency authorities in place during PHE. States also faced fiscal uncertainty due to slower revenue growth projections, rising inflation and labor shortages, as well as potential changes in the political landscape as 36 states await the results of gubernatorial elections in November 2022. with results that could have implications for state Medicaid policies and for Medicaid enrollees.
The study will be discussed today at noon ET during a web briefing hosted by KFF with the National Association of Medicaid Directors. The two new reports released today ahead of the briefing are:
Medicaid Enrollment and Spending Growth: FY 2022 and 2023
How the pandemic continues to shape Medicaid priorities: Results from the annual Medicaid budget survey for state fiscal years 2022 and 2023
For more data and analysis on Medicaid, visit kff.org.