This Kaiser Family Foundation (KFF) report, published December 11, finds that allocating the increased federal Medicaid funding proposed under the Congressional health care reform bills (HR 3590, HR 3962) using the current Medicaid funding system would perpetuate inequalities in the system.  Their analysis of alternative distribution systems finds that increased federal funding under the proposed system would create higher costs and coverage in the south and west, compared to the northeast and Midwest.  Instead, KFF recommends shifting Medicare expenses for dual-eligibles to the federal government, increasing matching rates for certain services, and targeting funds to states with large increases in new enrollment.  The authors suggest that such alternatives would be less complex and reduce inequality.  The report also provides state-level data on the effects of the potential Medicaid funding systems.

From the report:

Expanding Medicaid to cover low-income populations has been a fundamental component of leading health reform proposals. The House Leadership Bill would expand Medicaid to 150% of the federal poverty level (FPL) and the Senate Leadership Bill would expand Medicaid to 133% FPL. In both scenarios the federal government would finance a substantial share of costs for the expansion groups; however, this analysis shows that is it is possible to distribute increased federal payments in multiple alternative ways that could be less complicated and would avoid perpetuation of inequities that would be associated with providing higher matching rates just for new eligible Medicaid enrollees.

Full report: Alternatives for Financing Medicaid Expansions in Health Reform (PDF | 686.07 KB)

Kaiser Family Foundation. (2009). Alternatives for financing Medicaid expansions in health reform. Holahan, J.