Federal Bailouts of Medicaid Encourage the Unsustainable Status Quo

Kathryn Nix / July 16, 2010

In the past few months, the Senate has made several attempts to extend the Medicaid bailout included in the stimulus package. States share the cost of Medicaid with the federal government, and because of the influx of new beneficiaries due to increased job loss, the federal government increased the portion of the cost that it would cover.

This was bad policy. Congress should avoid another bailout that would treat low-income Americans inequitably from state to state and further delay reforms to increase the fiscal sustainability of Medicaid.

Recent analysis by Heritage’s Brian Blase shows that when Washington increases Medicaid matching rates, aid is unfairly distributed. Richer states with more lavish Medicaid programs receive more assistance.

According to Blase’s analysis, of Americans living in poverty, 6.6 percent live in New York, yet New York received 15 percent of bailout money in the first stimulus. Conversely, Georgia is home to 3.6 percent of Americans living in poverty but received only 2 percent of federal assistance. (more…)