Growth of State, Local Healthcare Expenditures Finally Slowed in 2013

State and local government healthcare spending grew at a rate of just 3.2% in 2013, which is a sharp decline from the previous 2 years, according to the latest data from CMS.

An analysis by The Pew Charitable Trusts found that the deceleration in spending largely occurred because of slower growth in Medicaid and state and local employee health insurance premiums. These 2 cost categories are the largest in state and local spending.

“Despite the recent slowdown in spending, health care still poses serious fiscal challenges for states and localities that must balance their spending and revenue each year,” according to the report.

State Medicaid spending grew by only 6% in 2013 after increasing by 22% and 12% in 2011 and 2012, respectively. Spending in 2013 marked a return to the typical Medicaid spending pattern, according to Pew’s research.

During the Great Recession, Medicaid’s ranks swelled, but federal stimulus money more than offset increases in total program expenditures so that the states’ share of Medicaid spending actually declined. When the federal money stopped in 2011, state Medicaid expenditures rose steeply until returning to normal in 2013.

Projections by CMS expect state and local government healthcare spending will increase by 49% from 2013 to 2023. Furthermore the Government Accountability Office expects that healthcare spending will be the primary driver of long-term fiscal challenges facing state and local governments.

While total Medicaid spending for states was expected to increase substantially in 2014 due to Medicaid expansion programs under the Affordable Care Act, the cost increase for newly eligible enrollees was actually covered entirely by the federal government.

The decline in state and local healthcare spending is following the national trend. Overall US healthcare expenditures grew by a similarly slow rate in 2013: 3.6%. However, unlike state and local government spending, the country’s healthcare expenditures has been growing relatively slowly for 5 years now.