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State responses to federal matching grants: The case of medicaid

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  • Leung, Pauline

Abstract

While Medicaid is currently financed by open-ended matching, in which the federal government’s contribution is uncapped, there has been interest in transforming 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 to 6 percent and that these results are driven by high-spending states. Using this estimate, I discuss the welfare impact of a block grant reform.

Suggested Citation

  • Leung, Pauline, 2022. "State responses to federal matching grants: The case of medicaid," Journal of Public Economics, Elsevier, vol. 216(C).
    • Handle: RePEc:eee:pubeco:v:216:y:2022:i:c:s0047272722001487
    DOI: 10.1016/j.jpubeco.2022.104746
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    Cited by:

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    3. Manuel E. Lago & Santiago Lago-Peñas & Jorge Martinez-Vazquez, 2024. "On the effects of intergovernmental grants: a survey," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 856-908, June.
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    6. Liam Sigaud & Markus Bjoerkheim & Vitor Melo, 2024. "The Hidden Subsidy of the Affordable Care Act," Papers 2407.07217, arXiv.org.

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    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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