Medicaid Caps Stick It to States with Smaller Medicaid Budgets

More than $18,000 to spend on Medicaid for each person in Alaska; Nevada gets just over $4,000. Does that sound fair? Well, that’s the funding formula in the GOP health care repeal plan. States that spend a lot on Medicaid now get a lot later. States that spend less get stuck with less. And the formula doesn’t change. Ever.

Republican plans to repeal the Affordable Care Act– including the American Health Care Act passed by the House— go well beyond repealing the health care law to a wholesale gutting of Medicaid funding, using what is called a “per capita cap” model.  These caps arbitrarily lock states into their 2016 spending level. This means that states that spent more in 2016 get a higher cap. And states that were relatively low spending in 2016 are effectively penalized with much lower federal funds for the indefinite future.

A Medicaid per capita cap is just that—a fixed amount the federal government will pay each state per person in the Medicaid program.  Per capita caps would end the federal government’s 50-plus year guarantee to match each state’s actual Medicaid spending and replace it with funding that is capped at a pre-set amount and pre-set growth rate.

This would obviously leave states unable to adjust to massive increases in Medicaid costs brought on by epidemics or other needs.

And despite claims to the contrary, no states receive any additional flexibility under a per capita cap arrangement.

Caps are set based on a given year’s Medicaid spending and states that spend over their per capita allotment will be punished with a dollar-for-dollar penalty the following year. States that do not spend over their cap do not get to keep the difference in the way a managed care plan would.

If Congress passes the current Medicaid per capita cap proposal, states like Nevada, Georgia and Alabama will receive well under the national average federal Medicaid funding cap and less than half of what other states receive forever. Medicaid is the largest source of federal funding for states– meaning these states’ senators are poised to lock their own states into the worst budget deal of our lifetimes.

The table below illustrates the huge disparity in federal funds to different states that will be frozen in place under GOP health care repeal plans.