New Ideas in Medicaid Financing
Source:
Health Affairs (by Michael O’Grady and Jennifer Baxendell Young)
- Medicaid faces major challenges from the new responsibilities and financial pressure from the new health care law. The authors introduce some solutions to fix Medicaid’s financing structure.
- The author’s proposal adjusts a state’s share during an economic downturn to allow states to make a lower contribution during this time. However, unlike current practice, the federal funds would be paid back using a lower federal medical assistance percentage (FMAP), and a higher state share, after the state’s economy has had a chance to rebound. This plan would provide federal help to states during a downturn without raising the federal debt.
- The proposal highlights several steps that need to be taken to lower the FMAP including the establishment of a trigger mechanism by the states to indicate their economic vulnerability. Another set involves setting up a higher percentage share from the state until the additional federal money is repaid, along with an amount equal to the market rate for federal borrowing during the time period of the emergency FMAP.
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