Containing Costs: Bending the Medicaid Cost Curve

Source: Debra Miller, Capitol Ideas, Vol. 56 no. 3, May/June 2013

U.S. health care costs are likely to be around $2.8 trillion in 2013. In 2010, U.S. spending on health was 17.6 percent of gross domestic product; for comparison, the Netherlands spent 12 percent of GDP, the next highest spender of developed nations. The Centers for Medicare and Medicaid Services expects health spending to hit $4.6 trillion by 2020—19.8 percent of GDP. While spending growth has slowed in recent years—it has been near 4 percent for about four years and has reached a 14-year low—many believe the spending levels are unsustainable.

State governments bear some of the burden. The biggest health care expense for states is their share of the Medicaid program, which provides health insurance for low-income individuals. In 2011, total Medicaid spending was $407.7 billion. The program has surpassed K–12 education as the biggest state budget expenditure.

Those are some of the reasons states are looking for ways to contain costs. Here are four examples where states are attempting to do just that.