Alternative Approaches to Federal Medicaid Financing

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June 2016

Concerns about the level and rate of growth in federal Medicaid expenditures have prompted some policymakers to consider changes that would alter the trajectory of spending—including alternatives to the current financing structure—that would reduce the rate of growth in Medicaid spending. Chapter 3 presents the Commission’s initial analysis of these financing alternatives.

The current financing structure has been criticized for its open-ended match of state expenditures, as well as for its encouragement of financing arrangements that substitute federal funds for state funds without necessarily increasing or improving services for Medicaid enrollees. On the other hand, the existing financing structure helps to ensure that states have the resources to respond to current events such as recessions, natural disasters, and public health emergencies.

The chapter concludes with a side-by-side comparison of major approaches to financing reform—block grants, capped allotments, per capita caps, and shared savings—looking at how each could affect not only state decision making and federal savings, but also beneficiaries and providers.

Publication Type: Reports to Congress

From: June 2016 Report to Congress on Medicaid and CHIP

Tags: data, eligibility, Federal Medical Assistance Percentage (FMAP), financing, health care related taxes, intergovernmental transfers (IGTs), matching rate, Medicaid expansion, shared savings, spending, state budgets, supplemental payments, Transformed Medicaid Statistical Information System