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Medicaid Cost Containment 2003

Options for Medicaid Cost Containment
January 2003


Due to continuing concerns about the growth in Medicaid expenditures and number of recipients, members of the General Assembly requested that we review the South Carolina Medicaid program. This is our third recent Medicaid report. Two LAC reports published in 2001 focused on fraud and abuse, prescription drug costs, state funding, managed care, premium payments, and the eligibility determination contract with the Department of Social Services.

The audit requesters were primarily concerned with identifying ways to reduce the cost of the Medicaid program without reducing services. We reviewed Medicaid enrollment and how the Department of Health and Human Services (DHHS) ensures that only eligible people receive Medicaid and that the recipients use those benefits appropriately. We also looked at strategies that the department can use to improve the cost-effectiveness of the Medicaid program including a state preferred prescription drug list, a focus on community long term care, recipient cost sharing, estate recovery, and debt collection.

In South Carolina, Medicaid is a $3.6 billion program, with the federal government paying approximately 69%. In FY 01-02, DHHS spent about $480 million in state general funds. From FY 99-00 through FY 01-02, total Medicaid expenditures increased 25% for an average of 12% or $360 million a year. During the same period, general fund revenues in the state decreased 1.53%. The growth in Medicaid is also tied to the growth in private health care spending, and states cannot control health care costs on their own. However, strategies that can slow the rate of growth by 2% to 3% can result in millions of dollars of savings.