A Perspective on Medicaid

Most forecasts of Medicaid expenditures fell far short of actual costs primarily because of failure to develop realistic indicators of potential demand for health services by the needy and failure to account for expected increases in the cost of medical care. For the year before to the beginning of Medicaid in Massachusetts in September, 1966, expenditures for medical assistance to welfare recipients were $107.6 million. Two years later costs for the same period were $205.8 million. The largest components of Medicaid expense are in the hospital and nursing-home areas, where price alterations are principally responsible for changes in costs. Few state Medicaid agencies have been able to impose meaningful controls upon the quality and quantity of medical care. In Massachusetts an automated data-processing system to develop such measures will soon be inaugurated. The capability of the states to offer comprehensive Medicaid services is unlikely until the health system undergoes major reorganization, bolstered by greater federal participation through expanded matching funds.