Medicaid: Spending Pressures Spur States Toward Program Restructuring

GAO discussed how states are addressing rising Medicaid costs, focusing on the: (1) federal mandates that have led to Medicaid cost growth; (2) states' use of section 1115 waivers for managed care programs; and (3) states' experiences with section 1115 managed care programs. GAO noted that: (1) federal mandates, medical price inflation, and higher provider reimbursements have contributed to rising Medicaid costs; (2) 22 states have sought waivers from federal regulations to contain Medicaid costs; (3) some states have mandated the enrollment of acute care populations into managed care programs, while expanding coverage to previously ineligible individuals; (4) Arizona has lowered its Medicaid spending by millions through the use of competitive bidding and has developed information systems that will collect and analyze medical encounter data; and (5) adequate planning and appropriate quality assurance systems are essential for Medicaid's effective transition to managed care.