Medicaid Expansions:

Coverage Improves but State Fiscal Problems Jeopardize Continued Progress

HRD-91-78: Published: Jun 25, 1991. Publicly Released: Jul 26, 1991.

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Pursuant to a congressional request, GAO examined the effects of legislation between 1984 and 1989 that expanded Medicaid eligibility and improved services, focusing on: (1) how these modifications affected low-income pregnant women and children; (2) the extent to which states implemented Medicaid expansions; and (3) whether these expansions contributed to state fiscal problems.

GAO found that: (1) the Medicaid program as a whole contributed to state fiscal stress between 1984 and 1989; (2) Medicaid expenditures rose at an average annual rate of 10 percent, while total state revenues increased at a rate below 8 percent; (3) half of the changes in Medicaid eligibility and services during this period were targeted specifically to low-income pregnant women and children; (4) since 1984, Congress significantly increased states' ability to target Medicaid services to low-income pregnant women and children; (5) most states went beyond mandated coverage levels by implementing optional Medicaid expansions and adopting administrative practices to simplify gaining and maintaining access to Medicaid services; (6) federal expansions of state Medicaid eligibility led to increases in the numbers of pregnant women and children served and reduced diversity across the states for the targeted population in terms of recipients served and resources expended; (7) expansions targeting pregnant women and children were not the primary factor in rising Medicaid expenditures; (8) factors contributing to the rapid growth in Medicaid expenditures included economic downturns, high rates of inflation, and disproportionate growth in numbers of aged and disabled recipients; (9) state options for financing increased Medicaid costs included higher tax revenues, reducing funding for other programs, and fund shifting within the Medicaid budget; and (10) when states cut back programs or aspects of Medicaid to finance a particular mandate, intended gains for the target population may be affected.

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