Redistribution of Federal Funding Across States Due to the Financing of Medicaid and CHIP

Brief

Redistribution of Federal Funding Across States Due to the Financing of Medicaid and CHIP

Abstract

A new analysis of federal government spending by the Urban Institute, with funding from the Robert Wood Johnson Foundation, finds that Medicaid and CHIP largely transfers funding from higher-income states to lower-income states. This redistribution mostly occurs because of the higher Medicaid/CHIP federal matching rates low-income states receive, but it also owes to the smaller tax contributions such states make to the federal treasury. Many higher-income states receive high shares of total federal Medicaid/CHIP spending (and have more generous programs than average), but their residents and businesses contribute even more to federal revenues. At the same time, many lower-income states receive low shares of national Medicaid/CHIP spending (and have less generous programs per low-income resident), but their residents and business make even smaller contributions to the treasury.

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