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Mr. Chairman and Members of the Subcommittee, it is my pleasure to be here today to discuss the status of the Medicaid program. The rapid increases in Medicaid spending and the growing prominence of the program in the federal budget present a serious challenge to the Congress.

Between 1988 and 1993, overall Medicaid spending increased at an annual rate of 16 percent, while the federal share increased at the remarkable rate of 20 percent per year. Yet over the same period national health expenditures rose by less than 10 percent a year. Under current law, Medicaid expenditures are expected to continue to rise faster than other health expenditures. With federal spending of $89 billion in 1995, Medicaid now accounts for about 6 percent of the federal budget. By 2002, that share is projected to increase to 8 percent, or about $178 billion.

Both the House and Senate versions of the budget resolution for 1996 assume significant reductions in the rate of growth of Medicaid spending. Under the assumptions of the budget resolutions passed by the House and Senate, federal Medicaid spending in 2002 would be only $121 billion or $125 billion, respectively. Those amounts are well below CBO's current projection of federal Medicaid spending in that year. Clearly, reducing the growth in program spending will require both the Congress and the states to make significant policy changes.

My statement today addresses four topics:

• An overview of the Medicaid program,
  
  
• Past trends in program spending,
  
  
• CBO's projection of future spending under current law, and
  
  
• Considerations in modifying the Medicaid program to meet the requirements of the budget resolution.

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