June 3, 2003


PDF of this report

Full Report:
Administration’s Medicaid Proposal Would Shift Fiscal Risks to States

View Related Analyses

If you cannot access the files through the links, right-click on the underlined text, click "Save Link As," download to your directory, and open the document in Adobe Acrobat Reader.

A joint report from CBPP and the Georgetown University Institute for Health Care Research and Policy, Administration’s Medicaid Proposal Would Shift Fiscal Risks to States, examines the Administration’s proposal to give states a modest increase in funds between 2004 and 2010 to help cover their Medicaid costs during the state fiscal crisis.  This offer is an unfavorable deal for states, the report explains. In return for this temporary boost in federal funding, states that accept the offer would have to:

No Net Increase in Federal Funding Over Ten Years Under Plan

Fiscal year

Change in federal funding compared to current law


+ $12.7 billion


- $150 million


- $4.4 billion


- $8.3 billion

In addition, the reduced federal payment levels in 2013 — when federal payments would fall $8.3 billion below the level projected under current law — would likely serve, when the block grant is renewed, as the starting point for deliberations over the size of the federal block grant for years after 2013.


States Could Be Forced to Make Cuts That Harm Vulnerable Populations

Under the Administration plan, states that accept capped federal payments would be given more control over their Medicaid programs, but they would likely have substantial difficulty achieving sufficient savings to offset the probable loss of federal funds.  States already have considerable flexibility (and financial incentive) to undertake cost-containment initiatives.  Moreover, 83 percent of the Medicaid expenditures that fall into the categories that states would be allowed to cut under the proposed block grant goes for services for elderly or disabled beneficiaries, which generally are difficult for states to cut.  Finally, research indicates that various measures that might achieve significant savings, such as capping enrollment or imposing high premiums or other significant charges on beneficiaries, could seriously impede access to necessary care.

States’ need for fiscal relief, the report concludes, should be met by measures that help states contain health costs in effective and responsible ways while making resources available to help them maintain health coverage for their residents.  The Administration’s block-grant proposal does not meet this test.