This study of the Medicaid program analyzes changes in child recipients, costs, and service use during the 1980s to assess the effects of recent federal policy shifts and to project future costs for children. Data presented in this study are from the Health Care Financing Administration's Medicaid Statistical Report for the years 1979, 1985, and 1990, three time-points that demarcate major federal policy shifts. About half of all recipients added to the Medicaid program during the last decade were children; they comprised 14% of the total cost growth experienced by the program. In addition, the eligibility distribution of children receiving Medicaid shifted markedly over the last decade. In 1979, children receiving cash assistance comprised 90% of total child recipients; by 1990, this figure dropped to 72%. Future expansions to the Medicaid program are projected to cost less than the initial expansions. This is because the early expansions disproportionately served infants, who require more hospital services than older children. Despite the major changes in Medicaid eligibility for children during the 1980s, only limited cost shifts occurred in expenditures for children. Children continue to consume a small portion of the Medicaid budget. Congress should explore options for guaranteeing that their share of funding for services will be adequate. Moreover, since future expansions will be far less expensive than those already implemented, accelerating the phase-in process for all poor children may be a more financially feasible policy option than many policymakers anticipate, despite the fiscal hardships facing many states.

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