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State Responses to Federal Matching Grants: The Case of Medicaid

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  • Pauline Leung

    (Cornell University)

Abstract

While Medicaid is currently financed by open-ended matching, in which the federal government pays an uncapped percentage of program expenditures, there has been interest in trans-forming the financing structure to block grants, which limits federal cost-sharing to a fixed amount. To understand the implications of this reform, I measure the effect of match rates on Medicaid spending by using the variation induced by a kink in the match rate formula. I find that a percentage point increase in the federal match raises per-beneficiary spending by 3 percent. Using this estimate, I discuss the welfare impact of a block grant reform.

Suggested Citation

  • Pauline Leung, 2021. "State Responses to Federal Matching Grants: The Case of Medicaid," Working Papers 647, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:647
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    References listed on IDEAS

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    More about this item

    Keywords

    Financial Management Reports; FMR; Centers for Medicare and Medicaid Services;
    All these keywords.

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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