4.3.2.3 CONSIDERACIONES SOBRE LOS MECANISMOS DE APLICACIÓN DE LA EUROORDEN

29

The Numbers

Providing health insurance for all Americans is complicated by the inequalities in wealth across the country. The poor, who are concentrated in some states, cannot afford inflationary health insurance premiums. The fact that governments in poorer states have lower tax bases compounds the problem of paying for public insurance. This is why, in 1965, the Congress enacted the Medicaid program, along with Medicare, to expand public health insurance coverage to both the poor and elderly. Under Medicaid’s federal-state cost-sharing arrangement, the federal government is responsible for between 50 percent and 83 percent of program outlays in the 50 states. The federal matching assistance percentage (FMAP) within 50–83 percent is based on a sliding scale depending on states’ per capita income (Y): FMAP = 1 - 0.45(Y_S/Y_US)2_{. Y}

S/YUS is the

ratio of a state’s per capita income to the US average per capita income. But because Congress placed upper and lower constraints on the sharing formula, and because of varying levels of generosity in service coverage and eligibility authorized by state legislatures, the burden of the program is not borne equally by taxpayers across the country.

In Chart 29, taxpayer burden is defined as the ratio of per capita state-only spending on Medicaid, excluding federal cost sharing, to the state’s gross state product, a proxy for state wealth. Taxpayers in only 10 of 21 states (white) with above-average wealth bore an above-average burden for their Medicaid program. Seven of these 10 states were from the Northeast and Mid-Atlantic regions, and only Rhode Island received more than the minimum 50 percent federal sharing of its program costs. By contrast, 11 other states (light gray) with above-average wealth incurred a below- average taxpayer burden for their state’s portion of Medicaid spending. Eight of these 11 states were west of the Mississippi River.

Another seven states (dark gray) had below-average wealth yet incurred an above-average taxpayer burden for their programs. These states had federal sharing proportions ranging from 54.7 percent (Pennsylvania) to 75 percent (West Virginia). The remaining 22 states (black) experienced both below-average wealth and below-average taxpayer burdens. The majority of these states were in the South and Rocky Mountain areas. Many of the southern states had 70 percent or more of their Medicaid costs funded by the federal government. This substantially reduced the burden on less-well-off taxpayers.

Commentary

The federal government’s cost-sharing arrangement for Medicaid appears to be doing what it was intended to in reducing the health care spending burden of poorer states. With federal sharing rates of two-thirds or more, a large majority of poorer states are bearing a lower financial burden for their Medicaid programs. Southern states and their poor have particularly benefitted from federal cost-sharing. The cost-sharing arrangement has also had a progressive effect in that one-half of wealthier states are bearing a higher- than-average burden for their Medicaid programs (Cromwell et al., 1995). However, a sizable group of states with relatively wealthy taxpayers are bearing a lower-than-expected burden (e.g., Texas, Illinois, Virginia).

Remaining inequities in state Medicaid funding burdens can be attributed to five factors. First, some state legislatures decide to fund more generous (e.g., Vermont and West Virginia) or more restrictive (e.g., Texas and Illinois) Medicaid programs than their wealth would support, on average. Restrictive states constrain their programs and pass on some of the federal cost-sharing to taxpayers in the form of lower taxes. Texas continues to operate a very limited Medicaid program, despite having the highest

Average State Wealth and Taxpayer Health Burden

Above Average Wealth and Taxpayer Health Burden

Above Average Wealth and Below Average Taxpayer Health Burden Below Average Wealth and Above Average Taxpayer Health Burden Below Average Wealth and Taxpayer Health Burden

Chart 29. State wealth and taxpayer Medicaid spending burden, 2005

Notes

State wealth = gross state product (GSP); Taxpayer health burden = state- only Medicaid spending as a percent of state GSP.

Sources

Centers for Medicare & Medicaid Services, Office of the Actuary (2007); Centers for Medicare & Medicaid Services (2006), CMS-64 Quarterly Expense Report; US Census Bureau (2007, 2011); Bureau of Economic Analysis (2009).

percentage of uninsured in the country (US Census Bureau, 2011). Second, states vary in the number of poor actually eligible for Medicaid under existing rules, e.g., fewer single mothers and children in Wyoming compared with California. Third, states in the Northeast have more expensive hospitals, which raises the cost of care but is not reflected in the cost- sharing formula. Fortunately for them, they also can draw upon above-average taxpayer wealth. Fourth,

the cost-sharing focus on per capita income misses some key alternative sources of tax revenues, such as tourism in Nevada and mineral wealth in Wyoming, Alaska, and Montana, that result in overly generous federal funding of their Medicaid program. And fifth, the 50 percent minimum federal-sharing floor results in inefficient targeting of federal cost-sharing to several wealthier states, money that would be better used in poorer states.

Potential Uses of Excess Federal and State Health Care