Governors' Letter Shows Why Medicaid Block Grants Are Necessary | Michael F. Cannon | Cato Institute: Commentary

Governors' Letter Shows Why Medicaid Block Grants Are Necessary | Michael F. Cannon | Cato Institute: Commentary: "The governors write that block grants 'would shift costs and risk to states.' In reality, the matching-grant system these governors seek to preserve is a massive cost-shifting scheme. Block grants would reduce this phenomenon.

For every additional dollar a high-income state spends on its Medicaid program, the federal government sends the state one matching dollar. Low-income states get as much as $4 from Washington for each additional dollar they spend.

Therefore, every time a governor expands his or her state's Medicaid program, the federal government's system of matching grants effectively shifts 50 to 80 percent of the expansion's price tag to taxpayers in other states.

The same is true in reverse. If governors tolerate waste, fraud and abuse, the matching-grant system shifts 50 to 80 percent of the cost to taxpayers in other states."

"Under block grants, states would keep 100 percent of the savings from rooting out fraud and abuse, which would encourage states to spend their Medicaid dollars wisely, reduce the cost of the program, and enable states to do more with fewer resources."