Medicaid: Spending Pressures Drive States Toward Program Reinvention

GAO discussed the status of the Medicaid Program, focusing on federal and state Medicaid spending trends and cost containment efforts. GAO noted that: (1) Medicaid Program spending totalled $131 billion in 1993 and is likely to double in the next 5 to 7 years; (2) to expand coverage and contain health care costs, states are seeking section 1115 waivers from Medicaid restrictions on the use of managed care delivery systems; and (3) because Medicaid restrictions on the use of managed care reflect historical concerns over quality of care, section 1115 waivers require states to operate quality assurance systems and to collect medical data. GAO also noted that, while section 1115 waivers would free states to implement managed care cost containment strategies, such waivers could result in additional costs to the government, since: (1) states are applying Medicaid savings to finance coverage of additional populations not included under Medicaid; (2) not all of the approved section 1115 waiver demonstration programs are budget neutral and could cost more than anticipated; and (3) Congress may find it difficult to scale back the demonstrations if they prove to be more costly than anticipated.