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Title: State Responses to Federal Matching Grants: The Case of Medicaid
Authors: Leung, Pauline
Keywords: Medicaid
matching grants
JEL codes: H77, I13, H53
Issue Date: Feb-2021
Series/Report no.: 647
Abstract: While Medicaid is currently financed by open-ended matching, in which the federal government pays an uncapped percentage of program expenditures, there has been interest in trans-forming the financing structure to block grants, which limits federal cost-sharing to a fixed amount. To understand the implications of this reform, I measure the effect of match rates on Medicaid spending by using the variation induced by a kink in the match rate formula. I find that a percentage point increase in the federal match raises per-beneficiary spending by 3 percent. Using this estimate, I discuss the welfare impact of a block grant reform.
Appears in Collections:IRS Working Papers

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