Policy Documents

Improving Acute Care Medicaid by Utilizing Multipayer Mix

Reyn Archer, M.D. –
March 1, 2003

In this policy brief for ALEC, it examines the Medicaid program as well as a focus on specific areas that could be a means to improve the program, impact costs, and provide a path to community health improvement. It is also a reflection on what the program looked like through the lens of a physician who had responsibility for running a State Medicaid Program. Medicaid is divided into two general programs: one for long-term care and disabled populations,and the second for acute care for children and pregnant women. Total Medicaid expenditures increased 73 percent from 1985 to 1990 and another 135 percent from 1990 to 1999 to reach $152.6 billion.

Part of the cost of the Medicaid Program is from the administrative oversight of the program. Administrative costs occur at three levels: federal, state and within the payor/managed care organization. At the federal level, administrative costs in 1999 were greater than $9 billion – just over 6 percent ofthe total budget. At the state level an additional 5-7 percent is expended in administration. Administrative costs vary broadly among payers and have, in some cases, exceeded 35 percent of total program costs. Administrative costs across all levels run, on average, approximately 30 percent of the cost of the total program, but can run as high as 50 percent of total program costs.