Phil Galewitz, Kaiser Health News
“Republicans are finding out why changing Medicaid is so hard and why the easiest thing to do is to do nothing given the substantial variation in federal spending across states,” said John Holahan, a health policy expert with the nonpartisan Urban Institute.
Medicaid, the national health program for low-income people that covers about 1 in 5 Americans, is 60% funded by the federal government and 40% by states. Total spending in 2015 was about $532 billion, according to the latest official data.
Federal funding is open-ended, which means the government guarantees states it will pay a fixed rate of their Medicaid expenses as spending rises.
Those matching rates are tied to average personal incomes and favor the lowest-income states. Mississippi has the highest Federal Matching Assistance Percentage — 76% — while 14 wealthy states, including New York and California, get the minimum 50% from the federal government.
But state Medicaid spending varies significantly, too, and that influences how much federal money each receives to fund its program. State policies about how generous benefits should be and how much to pay doctors and hospitals account for those differences.
Related: 5 ways the GOP health bill could change your health
GOP leaders want to give states a set amount of money each year based on the number of Medicaid enrollees they had in 2016, a formula known as per-capita caps.
A per-capita system would benefit high-spending states already receiving relatively rich allotments from the government, the Urban Institute said in a paper last September.
According to its estimates, if the system were in effect this year, Vermont would receive $6,067 per enrollee — one of the highest allotments in the country — while New Hampshire would get the least, just $3,084 per enrollee.
Per-capita caps would limit the government’s Medicaid spending because it would no longer be on the hook to help cover states’ rising costs. But caps also would shift costs and financial risks to the states and could force them to cut benefits or eligibility to manage their budgets.
“It would present a huge problem,” said Adam Fox, a spokesman for the Colorado Consumer Health Initiative, an advocacy group.
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