Update on Federal Medicaid Funding

NCPA Expert: Federal Medicaid Funding Is Still Flawed

Source: NCPA

DALLAS (May 10, 2011) — The richest states that spend the most money receive more money for Medicaid under the federal formula used to decide how much funding states receive, according to a new report by National Center for Policy Analysis (NCPA). 

 “The current formula for determining federal dollars for state Medicaid programs is designed to even out the disparities between rich and poor states,” co-author & NCPA Senior Fellow Pam Villarreal explained. “However, most states with smaller poverty populations received a larger share of federal Medicaid funds, while states with larger poverty populations received less.”

Villarreal warns the financial burdens will worsen, starting in 2014, when health reforms require that the federal government expand the mandatory population that must be covered under Medicaid. “It’s a bad situation about to get worse. Now that the Affordable Care Act is requiring coverage of new populations who are way above the poverty level, this will wreak further havoc on state budgets in just a few years.”

 “Poorer states have a very hard time trying to cover the Medicaid enrollees they already have,” said Villarreal. “These states will get small amounts of additional monies when the new rules go into effect but that will taper off quickly and the states will be left to cover the additional mandate.”

For figures on individual states, the report breaks out by state-by-state numbers for federal Medicaid funding versus the distribution of poverty for all 50 states within the study here: http://www.ncpa.org/pub/ba744

Villarreal identifies the following solutions, “States should have the flexibility to use their federal funds as they choose, and federal funds should be capped at a certain dollar amount.” However, she concludes, “Now that the Affordable Care Act mandates coverage of new populations, states will have to deal with the disparity in the funding formula as well as the eventual burden of providing coverage out of the estate budgets to additional enrollees.”