Bridging Disciplinary Boundaries (January 11 - 14, 2007)

OBJECTIVES: This study was an attempt to answer the question: How effectively is Medicaid meeting the financial needs of poor states and those with high health risks? Thus, this study evaluated the two aspects of the Medicaid program: (1) distributive effect of the current Medicaid matching formula (or the Federal Medical Assistance Percentage formula) and (2) the degree of target efficiency in channeling Medicaid funding to states with higher rates of public health problems. METHOD: To achieve the first objective, we calculated two elements of Medicaid payments: (a) average Medicaid payments, in dollars, in the state and (b) average federal subsidies, in dollars, for the state. For data analysis, we dealt with the average payment per beneficiary and the average payment per poor person. Thus, we ran regression analyses of the 4 types of average payments, with per capita personal income as an independent variable and with race as a control variable. To achieve the second objective, we ran regression analyses of the same 4 types of average payments, with the prevalence of asthma, diabetes, hypertension, and obesity as independent variables and race as a control variable. RESULTS: Regarding the first agenda: Medicaid payments per beneficiary in the state were positively related to state's per capita income. Federal subsidy per beneficiary was not significantly related to state's per capita income, indicating that poor and rich states received the same level of subsidies per beneficiary. Medicaid payment per poor person in the state was positively related to state's per capita income, indicating that rich states provided larger Medicaid payments per poor person. Federal subsidies per poor person in the state were positively related to state's per capita income, indicating that richer states received larger federal subsidies per poor person. Regarding the second agenda: The prevalence of asthma, diabetes, hypertension, and obesity was not related to the level of Medicaid payments per beneficiary in the state, of Federal subsidies per beneficiary, of Medicaid payments per poor person, or of federal subsidies per poor person. CONCLUSIONS: Richer states provide larger Medicaid payments than do poor states in terms of per-beneficiary payments. Likewise, richer states receive larger subsides on the basis of per beneficiary or per poor person. States with higher prevalence of medical conditions (asthma, diabetes, hypertension, and obesity) did not necessary receive larger federal subsidies, nor did they provide larger Medicaid payments. POLICY IMPLICATIONS: Medicaid's funding mechanism is inefficient in distributing funds to equalize the financial resources among states with different economic capabilities. Furthermore, the target efficiency in channeling more financial resources to states with more public health problems is zero. Thus, it is urgent to reform Medicaid. One approach is to federalize the financing of medical services, letting states pay supplements. This approach is the same as for finding SSI. The other approach is to develop a public health care insurance targeting low-income and poor families, the financing of which can be based on a percentage of earnings for working families and sliding-scale contributions for non-working families.