by Katherine Restrepo
Director of Health Care Policy, John Locke Foundation
Pretty much every state Medicaid expenditure triggers a federal match – that’s the way Medicaid works. And lawmakers have been quick to figure out ways in which they can ease pressure on state budgets by maximizing use of federal monies. Just check out North Carolina’s ongoing budget negotiations. This has become standard fiscal practice.
A prime example can be found in assessments placed on physicians, hospitals, and managed care organizations (see p. 98, line 14 of the Senate’s proposed budget). In the mid 1980s, Medicaid providers could volunteer to be assessed, or taxed, by the state, knowing that this would trigger increased federal payments, which the state would distribute to providers in return. Joseph Antos of the American Enterprise Institute explains a scenario cited by the Congressional Research Service:
For example, hospitals might agree to pay $10 million in provider taxes in exchange for the state increasing Medicaid hospital reimbursement by $20 million. On balance, hospitals gain $10 million in revenue. If the FMAP is 60 percent, the federal government would pay an extra $12 million. That gives the state budget an extra $2 million that it would not otherwise have received.
This artful strategy not only benefited healthcare entities and providers who served Medicaid patients, but also freed up money in state budgets that could then be used for purposes not limited to Medicaid.
To read more on the assessment game, click here.