CMS Updates Medicare, Medicaid Spending Estimates

CMS on Tuesday reported that there has been a "sharp slowdown" in the growth of federal Medicaid spending in fiscal year 2006, while Medicare spending in the same year has increased more than expected, CQ HealthBeat reports. Federal outlays for Medicaid are projected to increase by 1.8% in FY 2006, according to CMS.

Medicaid spending has slowed in part because of the shift of many prescription drug costs to Medicare. If those prescription drug costs were still covered by Medicaid, federal Medicaid spending for FY 2006 would be 5.5% above FY 2005 levels, still lower than the 12% growth experienced during FYs 2000-2002.

Other reasons CMS cited for the slowdown in Medicaid spending increases include:

Waivers and other joint efforts by states and CMS to increase the use of private health plans;
Greater use of home- and community-based long-term care instead of nursing homes;
Greater use of generic drugs by state Medicaid programs and multistate drug purchasing pools;
Improved economic conditions;
Federal efforts to stop states from improperly elevating federal matching funds; and
A law signed in February by President Bush that increases states' flexibility to modify Medicaid benefits.

Federal Medicaid expenditures for inpatient hospital care are projected to drop by 0.1% in FY 2006, and expenditures for nursing home care are projected to increase by 5.4% in FY 2006 and by 4.7% in FY 2007. Total federal outlays in FY 2007 are projected to increase by 4.6%. Sixteen states are projecting that their Medicaid expenditures in FY 2006 will be lower than in FY 2005, according to CMS.

Medicare Spending

CMS Administrator Mark McClellan said Medicare spending in FY 2006 has increased more than expected, indicating a need to revise spending for Medicare Parts A and B, CQ HealthBeat reports.

CMS has lowered by $34 billion its five-year estimate for the cost of the Medicare prescription drug benefit, compared with its estimate at the start of the year. However, the five-year cost estimate for Medicare Part A, which covers hospital care, is $17 billion higher than it was at the beginning of the year.

CMS in a statement said the higher projection for Medicare Part A "highlights the need for appropriate incremental reforms now." In addition, the five-year cost estimate for Medicare Part B, which covers physician and other outpatient care, is $30 billion higher than it was at the start of the year.

McClellan said the higher estimate was caused by the increasing use of physician-related services and hospital outpatient services under Medicare fee-for-service (Reichard, CQ HealthBeat, 7/11).

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