Study Reveals Why Medicaid Costs Soared

THE cost of Medicaid, America's health-care safety net for the poor and unemployed, zoomed upward from $51.6 billion four years ago to some $120 billion in 1992. Lawmakers ask: What went wrong? A new study by the Kaiser Commission on the Future of Medicaid finds that several factors - particularly health-care inflation - were responsible for the explosive growth of spending.

Medicaid spending particularly alarms governors, whose states must foot much of the bill. Many governors blame the rising costs on Congress, which mandated greater Medicaid services for pregnant women and children.

The Kaiser commission, however, found that while federal mandates have raised Medicaid spending somewhat, other factors play a much larger role. The Kaiser study, released over the weekend, notes that Medicaid spending climbed by 13 percent in 1989, 19 percent in 1990, 27 percent in 1991, and some 30 percent in 1992.

Governors, worried that costs are out of control, say that other critical programs, such as education, will be harmed unless Medicaid spending is checked. They have lobbied Congress heavily in an effort to gain more flexibility in dealing with Medicaid costs.

The study found that governors are correct in saying that federal mandates sharply expanded the number of people getting help from Medicaid. As the report notes, half of the 4.8 million new enrollees are pregnant women and children who were added to the rolls at the behest of Washington. However, all of these new enrollees account for only 11 percent of the rise in Medicaid costs. Other factors are much more important, including:

* Inflation. The rapid rise of health-care costs outside Medicaid's control account for 31 percent of the rise in total spending.

* AIDS and drugs. Medicaid costs are far greater for "crack babies" and AIDS patients than for traditional recipients whose medical needs are less costly. The rapid spread of these problems has sharply pushed up total costs.

* Elderly and disabled. An estimated 200,000 elderly and 600,000 disabled patients were added from 1989 to 1991, and the costs of their care raised total Medicaid outlays by 19 percent.

The study could lend weight to President-elect Clinton's argument that health-care inflation, plus the growing number of uninsured Americans, represent a growing financial crisis.

At the present growth rate, within a year Medicaid spending could equal half the national defense budget, and eat up much of the savings from the end of the cold war.