Decomposing Medicaid Spending during Health System Reform and ACA Expansion

Background: Expansion of the Medicaid program is likely to create new budgetary pressures at the state and federal levels, creating a need for greater understanding of how program dollars are allocated and what drives spending growth. Objective: To characterize Oregon Medicaid expenditures across diseases and medical conditions, during periods of payment reform and coverage expansion. Research Design: Decomposition of changes in Medicaid expenditures using a person-based allocation of spending across 50 diseases/medical conditions. Four indices describe changes in costs per enrolled member, demographic shifts, prevalence of treated disease/condition, and costs per treated member. Subjects: Oregon Medicaid beneficiaries during 2011 (N=597,422), 2013 (N=614,858), and 2014 (N=978,237). Results: Expenditures on pregnancy/birth and mental conditions accounted for 24% of 2011 spending. Oregon's 2012 payment reform was associated with reduced spending attributable primarily to decreased prevalence of treated conditions. The 2014 Medicaid expansion was marked by lower pregnancy and mental health expenditures and higher spending on treatment for substance use and heart disease. Conclusions: Medicaid spending is concentrated among a small group of medical conditions, not all of which are typically associated with the program. The relative expenditure burdens for some conditions are likely to change with health system reform and enrollment expansions. Decomposition into 4 indices and reporting by disease/condition elucidate variability in drivers of cost growth.