As health care costs have risen at a rate far outpacing inflation and overall economic growth, states are having trouble containing the costs of Medicaid.
A report by Fitch Ratings finds that average annual Medicaid costs have increased by 6 percent to 7 percent over the past 20 years, compared to an average annual medical cost growth rate of 4.5 percent. That gap has for many years threatened states with long-term budget problems, but Fitch notes that a number of changes to the public health programs offer many state governments a way to avoid fiscal crisis.
Critically, a number of states have sought to implement a payment system that favors managed care instead of the long-prevailing fee-for-service system.
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