The coronavirus started as a medical crisis, but quickly produced an unemployment crisis and a state fiscal crisis. Medicaid, the state-operated health care entitlement that covers 67 million low-income Americans, has been strained by all three. As unemployment increases, so does eligibility for the program and the costs that it imposes on states — just as their revenues come under strain. To fill this gap, Congress in March provided $50 billion in extra funding for the program, bailing out states as it did when they faced economic headwinds in 2001, 2003 and 2009.
Yet, Medicaid’s finances are problematic not just in economic downturns. While the economy is growing, states may claim federal funds in proportion to their own expenditures on the program — encouraging them to spend as much as they can. This has led the program’s funds to be distributed in a manner that is neither accountable, focused nor fair. A program supposed to assist the poorest Americans has proven disproportionately lucrative for the wealthiest states.
Congress can get more value out of Medicaid by aligning financial and operational responsibility within the program — so that the federal government would directly provide benefits that it determines are of greatest national importance, while states should be required to pay for further expansions of benefits that they choose to make by themselves.
Chris Pope is a senior fellow at the Manhattan Institute and author of a recent report, “Taking the Strain Off Medicaid’s Long-Term Care Program.” Follow him on Twitter here.
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