Federal “block-granting” of Medicaid could have outcomes ranging from a multi-billion dollar gain to a multi-billion loss for New York’s $63 billion program, depending on how such a reform is designed, according to an analysis by the Empire Center’s health policy director, Bill Hammond.

Block-granting, under discussion as part of proposed Obamacare replacement legislation, would change the way the federal government funds Medicaid, switching from an entitlement program that provides matching aid to a system providing a fixed or capped amount of money for each state program or patient.

“Medicaid’s matching-aid system creates perverse incentives,” Hammond said. “In effect, it rewards states for increasing spending and penalizes them for cutting costs.” Block-granting, on the other hand, can create incentives for states to be more efficient while also affording them greater flexibility, Hammond noted.

Hammond examined five scenarios in which different block-grant concepts were applied retroactively to New York’s Medicaid spending from 2002 to 2012. Hammond found outcomes ranging from an $8 billion reduction to a $5 billion increase in federal payments, depending on the inflation factors and limits used.

The Empire Center, based in Albany, is an independent, non-partisan, not-for-profit think tank dedicated to promoting policies to make New York a better place to live, work and do business.

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The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

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