From 2000 to 2004, Medicaid spending growth adjusted to changes in the overall economy and rose by 12% annually between 2000 and 2002, and then slowed to 7.6% from 2002 to 2004 as the economy improved following the 2001 recession. The rate of Medicaid spending growth slowed because of both moderating enrollment growth and state efforts to control Medicaid per enrollee spending through benefit reductions and cost sharing. During this period of Medicaid enrollment growth, states were able to keep increases in health spending per Medicaid enrollee to levels below private insurance. Annual spending growth on medical services fell from 12.9% between 2000 and 2002 to 7.4% in the latest year. Nevertheless, this rise in spending from $182.7 billion in 2000 to $270.9 billion in 2004 during limited state and federal revenue growth made Medicaid a target of budget reduction discussions.
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