Medicaid: Statewide Section 1115 Demonstrations' Impact on Eligibility, Service Delivery, and Program Cost

GAO discussed the states' efforts to reinvent their Medicaid programs through section 1115 waivers, focusing on: (1) Medicaid spending trends; (2) states' efforts to contain Medicaid costs and expand coverage through section 1115 waivers; and (3) the waivers' potential impact on Medicaid spending. GAO noted that: (1) federal and state governments spent $104 billion more on Medicaid in 1994 than they did a decade previously; (2) Medicaid now consumes about 6 percent of all federal outlays; (3) section 1115 waivers free states from certain Medicaid restrictions on the use of managed care delivery systems and allow states to expand Medicaid coverage to individuals not normally eligible for Medicaid; (4) section 1115 waivers require states to operate alternative quality assurance systems and collect medical encounter data so they can monitor service use and access; (5) almost 3 million new beneficiaries could be added in 10 states with approved waivers; and (6) section 1115 demonstrations could increase federal spending, since the Health Care Financing Administration allows states to apply the federal share of Medicaid savings from managed care to expand Medicare coverage.