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More on Medicaid: Blended Rates

With enhanced FMAP rates expiring tomorrow, another potential Medicaid payment change could further shift costs from the federal government to the states. The Obama administration has proposed combining the various matching rates that states receive for different populations into one “blended rate” and eliminating state Medicaid provider taxes.

Right now, the federal government agrees to pay a different match rate for different groups:

With a blended rate, each state would receive a single match rate to cover all populations. The advantage of a blended rate is that it is simpler to administer and removes incentives to differentially enroll particular populations. The blended match rate would rely on projections for new enrollment in 2014 and would be set lower than the current average in order to save federal dollars. This would shift costs from the federal government to states at a time when states like California are already financially hard pressed and trying to cut Medicaid payments.

As of 2009, 43 of 50 states incorporated some provider taxes to fund their Medicaid programs. California relies quite heavily on provider and plan taxes to support Medi-Cal and Healthy Families and has had significant difficulties mustering the two thirds legislative majorities required to increase state General Fund taxes.

The August 2nd deadline on raising the federal debt ceiling is fast approaching, but it is not clear how much support the blended rate proposal has in the bipartisan discussions. Governor Brown sent a letter to the President stating that the proposed cost-cutting measures would “cripple California’s Medicaid program.”

For more information, the Center on Budget and Policy Priorities has a comprehensive analysis.