Medicaid spending slowed down in 2012 and similar slowing is expected for 2013. However, it’s being accomplished through precisely the same program that Mitt Romney and Paul Ryan endorse for the program – by effectively taking beneficiaries off the rolls.

The data comes from the respected Kaiser Family Foundation, and their annual survey of all 50 states. And the reasons for the slowdown in costs are two-fold. First, you have economic recovery, however modest, reducing the demand for Medicaid, as more rise out of poverty, and subsequently eligibility for the program. Medicaid enrollment increased by 3.2% in Fiscal Year 2012, down from 4.4% a year earlier. Total Medicaid spending increased by only 2.0%, compared to 9.7% in FY2011. The projections for FY2013 are expected to be similarly modest, with enrollment at 2.7% and cost growth at 3.8% (up from FY2012, but still one of the lower increases on record).

While total Medicaid spending reduced its cost growth, state spending on the program shot up. That’s because the fiscal aid for Medicaid from the federal government, from the stimulus and then from a supplemental fiscal aid law, went dry in FY2012. As a result, state spending increased 27.5% in 2012. States managed that one-time increase by using “cost containment.”

Forty-eight took on some kind of cost containment measure in 2012. Many of those were rate cuts, reducing what they pay to the hospitals and doctors who see Medicaid patients […]

Right now though, some of the cuts are especially severe. Here in the District of Columbia, Medicaid has implemented a 20 percent across-the-board cut for doctors. California slashed rates by 10 percent while South Dakota, Illinois and Tennessee put into effect smaller, single-digit cuts.

This trend is expected to continue, and while the federal government will increase funding for Medicaid reimbursement under the Affordable Care Act, as an enticement for doctors to accept more patients, that’s a temporary, two-year fix.

And if a President Romney repeals the ACA, he removes those Medicaid reimbursement enhancements, putting the program into the same situation – offering rates so low that doctors won’t take the patients. This has the effect of dropping people from the program, since it makes the Medicaid insurance almost meaningless. Under the Romney-Ryan plan, states would get a fixed amount of money to spend on Medicaid, regardless of economic conditions. They would have to resort to “innovation” and “cost containment.” Now we see how states accomplished that in 2012 – they simply cut rates, diminishing the effect of Medicaid as an actual health insurance program. That’s when they’re not changing eligibility rules for enrollment or cost-shifting onto beneficiaries.

So when you hear “cost containment,” keep this all in mind – in practical terms, it means states gutting Medicaid. And this makes all the more critical the ways in which Romney would cut costs on this key anti-poverty program.

David Dayen

David Dayen