State Fiscal Relief
Protecting Health Coverage in an Economic Downturn

Thank you for the opportunity to testify before the Subcommittee on Health as you consider a proposal to temporarily increase the Federal Medical Assistance Percentage (FMAP) to provide additional federal assistance to the states to cover the costs of their Medicaid programs. For the purposes of this testimony I will take it as given that the Congress wishes to provide additional support to the states and those funds can be found to do so. I will concentrate on the policy implications of the proposed method of boosting the FMAP. My position is that this is not the best approach for aiding the states and that the proposed policy will make an already flawed policy even worse. This is not in the best interests of the millions of poor and disabled Americans that the Medicaid program is intended to help.

To understand my objection to this approach, it is first necessary to look at how the FMAP system works, the incentives it creates for the states, and how the formula has affected the flow of federal funds to the states. . . .

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Robert B. Helms is a resident scholar at AEI.

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