Blase Policy Strategies | A New Recipe for Waste in Medicaid
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A New Recipe for Waste in Medicaid

May 5, 2020

The Democrats’ plan would have Washington cover all the health program’s costs for the states this year.

By Brian Blase

The left’s new priority is to convince Congress to send hundreds of billions of additional dollars to states to help them weather the coronavirus storm. A leading Democratic proposal would funnel the money through Medicaid, with a built-in incentive for states to keep their economies closed and unemployment rates high. Republicans should oppose it. If necessary, President Trump should veto it.

The bill, introduced by senior House Democrats, would increase the federal reimbursement of state Medicaid spending by 4.8 percentage points for each point by which the state’s unemployment rate exceeds a threshold, likely around 5%. The higher its unemployment rate, the less each state would have to pay for its share of Medicaid.

The new formula, proposed as a permanent change, would result in the federal government covering almost all Medicaid costs for the states this year. The maximum federal reimbursement would be 95% a quarter, but states could apply leftover percentages above that to a past quarter before the downturn. And the bill would prohibit states from taking new steps to ensure benefits go only to eligible people.

Medicaid is a joint federal-state program to finance health care for poorer Americans. Every dollar that states spend is matched by a federal contribution, with poorer states receiving a higher matching percentage than wealthier ones. On average, when a state spends a dollar on Medicaid, Washington adds $1.50.

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