The Problems and Future of Medicaid

Medicaid is a health insurance program passed into law in 1965 as a joint effort between the federal and state governments. It was designed to cover children, the disabled, and those who qualify by meeting low-income and asset guidelines. While the federal government provides some funding for Medicaid and has broad oversight, each state maintains its own guidelines for eligibility requirements and operation of the program within the particular state. The federal government funds approximately 57 percent of the total costs, while states fund the remaining expenses (Helms, 2007). The Federal Medical Assistance Percentage (FMAP) is a calculation used to compare each state’s per-capita income to the national per-capital income which determines how much federal assistance states receive toward their Medicaid expenses. This system was designed to give larger percentage subsidies to lower income states so that Medicaid benefits would be roughly equivalent across the nation.

The current Medicaid system has several inherent problems. One is that the FMAP method of funding does not take into account the varying fiscal abilities of states or the impact to states with higher concentrations of low-income residents. Data shows that over the past twenty five years, wealthier states are collecting a greater share of federal Medicaid dollars than poorer states (Helms, 2007). This creates significant politicization of the program as states seek to maximize their portion of federal funding and are able to grow the program with minimal expenditures, rather than looking to reform the program to save state and federal money. States are essentially rewarded for spending more on Medicaid since the more they spend, the more they receive in this federal matching program.

Another problem Medicaid faces is access for its recipients. Payment rates to providers are considerably less than those of Medicare and private insurance, which discourages providers from accepting Medicaid...