Medicaid and CHIP Payment and Access Commission: Alternative Approaches to Federal Medicaid Financing

This chapter from the June 2016 Report to Congress from the Medicaid and CHIP Payment and Access Commission (MACPAC) describes alternative approaches to federal financing for the Medicaid program. The majority of the spending growth in Medicaid can be attributed to enrollment; spending per enrollee has grown at rates comparable to or lower than Medicare and private coverage. Spending in Medicaid also reflect the unique role that Medicaid plays in providing coverage to individuals without other sources of health insurance, including low-income families and high-cost, high-need populations, such as people with disabilities and those in need of long term services and supports

There are several major alternatives to Medicaid financing that could result in federal savings, including block grants, capped allotments, per capita caps, and shared savings. Proponents of capping the federal share of Medicaid suggest that this approach could lead to federal savings and eliminate state incentives to maximize their share of federal funds. Others raise concerns regarding the potential cost shift to states and the limited options states have to curb cost growth without affecting enrollment, access to care, and the quality of coverage. In developing proposals to change Medicaid financing, policymakers will need to establish spending limits, define the level of state contribution, decide which programmatic features to include, and determine the degree of state flexibility and accountability.

This chapter includes discussions of capped allotments and shared savings approaches, which have received less attention than proposals to change Medicaid funding into block grants or per capita caps.

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