Imposing Per Capita Medicaid Caps and Reducing the Affordable Care Act's Enhanced Match

The Issue

Researchers examined the effect of putting a limit on how much federal funding states can receive per Medicaid enrollee, also known as a per capita cap, as well as the effect of eliminating financial support provided to states that expanded eligibility for their Medicaid program, also known as the enhanced Federal Medical Assistance Percentage (FMAP).

Key Findings

• Instituting per capita caps and eliminating the enhanced FMAP would decrease federal spending by up to $1.7 trillion over the next 10 years, shifting these costs to states.
  • Imposing per capita Medicaid caps would decrease federal spending by up to $1.1 trillion over the next decade.
  • Eliminating the enhanced FMAP would decrease federal spending by $563 billion over the next decade.
• States trying to offset these federal spending reductions would need to increase their state Medicaid spending by nearly 40%.
• States with lower average incomes would be most affected by decreases in federal Medicaid funding.

Conclusion

Researchers say reducing federal Medicaid spending by instituting per capita caps and eliminating the enhanced match will make it challenging for states to maintain their Medicaid programs as currently structured. States will need to either raise additional revenue through taxes, cut spending for other programs like education, cut payment rates for Medicaid providers, or reduce benefits for Medicaid enrollees.

About the Author/Grantee

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.