Most people agree that Medicaid should help the poor, particularly those whose poverty is related to their age and disability. However, the Affordable Care Act requires the federal government to pay a much greater share of the medical bills for nondisabled, nonpregnant adults than it does for elderly individuals, people with disabilities, children, and pregnant women.
The share of state Medicaid spending paid for by the federal government—known as the Federal Medical Assistance Percentage, or FMAP—had remained relatively unchanged throughout the program’s history until Congress and the executive branch changed that share, providing a strong incentive for states to expand Medicaid coverage to this new population of nondisabled, nonpregnant adults.
The new FMAP formula and expansions created two significant problems:
- The federal government rewards states much more generously for providing services to individuals who fit the new criteria than to individuals who arguably are more in need of assistance
- The Medicaid expansion overlooks differences among states in their capacity to fund services for this new population, benefiting states with high per capita income at the expense of low-income states.
As it considers repeal and replace legislation, Congress should reexamine this arrangement. Congress should seek to devise a Medicaid financing structure that treats eligible populations equitably and recognizes the differences in fiscal capacity among states.
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