Causes of Medicaid Expenditure Growth

Expenditures for the Medicaid program grew at the alarming and unexpected average annual rate of nearly 20 percent from 1989 ($58 billion) to 1992 ($113 billion). These statistics raise a critical question: What caused spending to grow so dramatically? Using State-level data from 1984-92, this analysis examines the determinants of Medicaid expenditure growth. The results indicate that Medicaid enrollment, Federal Medicaid policy, and State policy are significantly related to Medicaid expenditure growth. The analysis also finds the prevalence of acquired immunodeficiency syndrome (AIDS) to be significantly related to Medicaid expenditures.