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. 1998 Fall;20(1):83–126.

Figure 6. Annual Percent Change in Medicaid Total Spending: Calendar Years 1968-97.

Figure 6

SOURCES OF FUNDING

Medicaid registered record low spending growth in 1997.

  • Total Medicaid spending was $159.9 billion in 1997, an increase of just 3.8 percent over the 1996 level. This rate of increase represented the slowest growth in Medicaid spending since the inception of the program. Medicaid average annual spending growth decelerated from the late 1980s to the current period: from 19.5 percent for 1988-91 and 12.7 percent for 1991-94 to 5.9 percent in 1994-97.
  • The rapid growth from 1988 to 1994 was attributable to three basic factors (U.S. General Accounting Office, 1997):
    1. An increase in the number of Medicaid enrollees.
    2. An increase in nominal spending per recipient.
    3. Explosive growth in the disproportionate-share hospital (DSH) payments.
  • The slowdown in total Medicaid spending from 1994 to 1997 is attributable to:
    1. Downward pressure on each of the factors previously mentioned (Holahan and Liska, 1997).
    2. The effects of the 1996 Welfare Reform legislation.
    3. Favorable general economic conditions, including both income growth (which reduces the number of low-income individuals and families) and low health cost inflation generally.