Financing the health care safety net: How federalism and Medicaid's funding formula shape state budgets and American welfare

This dissertation explores the political development of Medicaid financing, specifically its federal-state cost sharing formula. This dissertation traverses a half-century of congressional policymaking and an original 30-year dataset of state-level Medicaid expenditure and enrollment figures to provide a positivist account of how the federal and state governments' shared financial responsibilities for Medicaid affect overall Medicaid expenditures and state budget priorities. This dissertation also considers the direct and indirect financial burden that Medicaid's costs impose on taxpayers---both in their capacity as Americans and as residents of individual states.;This dissertation argues that the growth in Medicaid costs is attributed to the resiliency of a funding formula that subsidizes the states' policies and redistributes liability for Medicaid expenditures between the states and federal governments. By subsidizing the costs of a state's Medicaid program, a state's Federal Medical Assistance Percentage (FMAP) reduces the effective fiscal burden of its Medicaid policies, thereby incentivizing policymakers to expand Medicaid beyond what is warranted by the policy preference of the state's residents. As a result, state budgets are likely to reflect an intentionally inefficient, yet politically rational, allocation of public resources. Compounded over decades, and exasperated by more recent adjustments that reduce the states' direct fiscal responsibilities for their Medicaid policies, the fiscal imperative imposed by Medicaid's financing institution has compelled states to maintain a rate of growth in Medicaid expenditures that now threatens to overwhelm the states' ability to adequately fund its other public commitments.