Presentation on theme: "The Heritage Foundation October 11, 2011 Health Policy Series: Medicaid James C. Capretta Visiting Fellow"— Presentation transcript:
The Heritage Foundation October 11, 2011 Health Policy Series: Medicaid James C. Capretta Visiting Fellow email: firstname.lastname@example.org
2 Federal Medicaid Spending Source: CBO Historical Tables
3 The Matching System Medicaid is financed with a federal-state matching formula. The federal government pays a fixed percentage (Federal Medical Assistance Percentage, or FMAP) of every dollar spent by a state on Medicaid. – The FMAP differs by state but ranges from 50 percent to nearly 80 percent. The formula for determining the FMAP is as follows: FMAP = 1 – (.45 x (PCI 2 state /PCI 2 U.S. )) The effect of this formula is to pay a higher FMAP to states with relatively lower per capita income. There’s a hold harmless preventing any state from getting less than a 50 percent FMAP.
5 The FMAP Budget Trap Assume a state has a 60% FMAP. That means when the state spends $1 on Medicaid, the federal government is spending $1.50, and total Medicaid spending is $2.50 (Federal share of $2.50 = 60%). What happens if a state needs to cut their budget, though? The state needs to cut $2.50 out of Medicaid to save $1 in the state budget, because the first $1.50 goes to the federal treasury, not the state. This sets up a terrible incentive for state governors and legislators. The result is that they spend their energy maximizing the federal share, and minimizing the “real” state share.
Your consent to our cookies if you continue to use this website.