Government Greed, Not Human Need, Drives the Growth of Medicaid

Medicaid is the joint federal-state program that funds health care for low-income Americans. Since its creation four and a half decades ago, Medicaid spending has accelerated out of control, largely because of the formula: The federal government must pay at least 50 percent of a state’s Medicaid costs, which creates an extraordinarily perverse incentive. For the governor or state legislator who gets federal funds, Medicaid offers “free” money. We have previously argued that the short-term solution is to convert the funding formula, known as FMAP (Federal Medical Assistance Percentages), to a per-head block grant to the states. Unfortunately, things have been moving in the wrong direction.

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