Redistribution of Federal Funding Across States Due to Spending on Medicaid and CHIP
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    Redistribution of Federal Funding Across States Due to Spending on Medicaid and CHIP

    Brief Oct-23-2020 | Holahan J, Haley JM | 1-min read
    1. Insights
    2. Our Research
    3. Redistribution of Federal Funding Across States Due to Spending on Medicaid and CHIP
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    Nurse Melanie Hernandez measures 11 year old patient Yazmine Euceda during a checkup at the School Based Health Center at Lake County High School in Leadville, Colorado. The School Based Health Center provides medical care and mental health services to students, teachers and families in the district.

    Researchers examine spending on Medicaid and the Children’s Health Insurance Program (CHIP), comparing the distribution of federal spending with states’ contributions to the federal treasury.

     

    The Issue

    Recent discussions about how to manage state budget crises related to the coronavirus outbreak and accompanying recession have revived long-standing debates about the distribution of federal dollars across states.


    Key Findings



    The authors find that redistribution of Medicaid and CHIP funds largely transfers funding from higher-income states to lower-income states. This redistribution mostly occurs because of the higher Medicaid/CHIP federal matching rates low-income states receive, as well as the smaller tax contributions such states make to the federal treasury.

    • Lower-income states that expanded Medicaid under the Affordable Care Act (ACA) are generally the biggest beneficiaries in the distribution of federal funds to states.
    • While lower-income states that did not expand Medicaid still largely benefit from receiving federal funds under current law, the research shows almost all non-expansion states would become even larger net recipients of federal funds if they were to expand Medicaid eligibility requirements. For example, if North Carolina and Georgia were to expand Medicaid eligibility in accordance with the ACA, the states would receive an additional $5.5 billion and $3.9 billion, respectively, in federal funds annually through Medicaid.

     

    Conclusion

    States that have not expanded Medicaid eligibility under the ACA make net contributions to the other states that have expanded, and many of these nonexpansion states have low per capita incomes. If the remaining states were to expand Medicaid eligibility, they would receive more in federal dollars than they contribute in taxes, as is the case with the traditional programs.

    About the Urban Institute

    The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.

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