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Medicaid and fiscal federalism during the COVID‐19 pandemic

Author

Listed:
  • Jeffrey Clemens
  • Benedic Ippolito
  • Stan Veuger

Abstract

We analyze the effects of the COVID‐19 pandemic on state and local government finances, with an emphasis on health spending needs and the role of the Medicaid program. We first find that enhanced federal matching funds are roughly the same size as expected increases in state Medicaid costs nationwide over the entirety of the federal budget window. Second, we show that there is substantial variation in states' exposure to increases in Medicaid program costs. Third, we show that the formulas through which fiscal relief has been distributed impact the extent to which aid targets the states experiencing the greatest need.

Suggested Citation

  • Jeffrey Clemens & Benedic Ippolito & Stan Veuger, 2021. "Medicaid and fiscal federalism during the COVID‐19 pandemic," Public Budgeting & Finance, Wiley Blackwell, vol. 41(4), pages 94-109, December.
    • Handle: RePEc:bla:pbudge:v:41:y:2021:i:4:p:94-109
    DOI: 10.1111/pbaf.12287
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    References listed on IDEAS

    as
    1. Congressional Budget Office, 2020. "The Budget and Economic Outlook: 2020 to 2030," Reports 56020, Congressional Budget Office.
    2. repec:aei:journl:y:2020:id:1008578025 is not listed on IDEAS
    3. Shoag, Daniel & Veuger, Stan, 2016. "Uncertainty and the geography of the great recession," Journal of Monetary Economics, Elsevier, vol. 84(C), pages 84-93.
    4. Jeffrey Clemens & Stan Veuger, 2020. "Implications of the COVID-19 Pandemic for State Government Tax Revenues," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 619-644, September.
    5. Congressional Budget Office, 2020. "Federal Subsidies for Health Insurance Coverage for People Under 65: 2020 to 2030," Reports 56571, Congressional Budget Office.
    6. Gabriel Chodorow-Reich & Laura Feiveson & Zachary Liscow & William Gui Woolston, 2012. "Does State Fiscal Relief during Recessions Increase Employment? Evidence from the American Recovery and Reinvestment Act," American Economic Journal: Economic Policy, American Economic Association, vol. 4(3), pages 118-145, August.
    7. Congressional Budget Office, 2020. "An Update to the Economic Outlook: 2020 to 2030," Reports 56442, Congressional Budget Office.
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    9. Jeffrey Clemens & Benedic Ippolito, 2018. "Implications of Medicaid Financing Reform for State Government Budgets," Tax Policy and the Economy, University of Chicago Press, vol. 32(1), pages 135-172.
    10. Congressional Budget Office, 2020. "Interim Economic Projections for 2020 and 2021," Reports 56351, Congressional Budget Office.
    11. Howard Chernick & David Copeland & Andrew Reschovsky, 2020. "The Fiscal Effects of the COVID-19 Pandemic on Cities: An Initial Assessment," National Tax Journal, National Tax Association;National Tax Journal, vol. 73(3), pages 699-732, September.
    12. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, vol. 96(11), pages 1079-1091.
    13. Stephan D. Whitaker, 2020. "How Much Help Do State and Local Governments Need? Updated Estimates of Revenue Losses from Pandemic Mitigation," Cleveland Fed District Data Brief 88241, Federal Reserve Bank of Cleveland.
    14. repec:aei:rpaper:1008586598 is not listed on IDEAS
    15. Stephan D. Whitaker, 2020. "Estimates of State and Local Government Revenue Losses from Pandemic Mitigation," Cleveland Fed District Data Brief 87963, Federal Reserve Bank of Cleveland.
    16. Congressional Budget Office, 2020. "An Update to the Budget Outlook: 2020 to 2030," Reports 56517, Congressional Budget Office.
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    Citations

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    Cited by:

    1. Breide, Lukas & Budzinski, Oliver & Grebel, Thomas & Mendelsohn, Juliane, 2023. "Forerunners vs. latecomers: Institutional competition in the German federalism during the COVID crisis," Ilmenau Economics Discussion Papers 182, Ilmenau University of Technology, Institute of Economics.
    2. Jeffrey Clemens & Philip G. Hoxie & Stan Veuger, 2022. "Was Pandemic Fiscal Relief Effective Fiscal Stimulus? Evidence from Aid to State and Local Governments," NBER Working Papers 30168, National Bureau of Economic Research, Inc.
    3. Clemens, Jeffrey & Veuger, Stan, 2021. "Politics and the distribution of federal funds: Evidence from federal legislation in response to COVID-19," Journal of Public Economics, Elsevier, vol. 204(C).
    4. Shuyang Wang & Yun Liu & Yingying Du & Xingyuan Wang, 2021. "Effect of the COVID-19 Pandemic on Consumers’ Impulse Buying: The Moderating Role of Moderate Thinking," IJERPH, MDPI, vol. 18(21), pages 1-19, October.
    5. Jeffrey Clemens & Stan Veuger, 2023. "Intergovernmental Grants and Policy Competition: Concepts, Institutions, and Evidence," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    6. Clemens, Jeffrey & Hoxie, Philip & Kearns, John & Veuger, Stan, 2023. "How did federal aid to states and localities affect testing and vaccine delivery?," Journal of Public Economics, Elsevier, vol. 225(C).

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    More about this item

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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