States with lower per capita incomes would become larger net recipients of federal funds if they expanded Medicaid eligibility under the Affordable Care Act, according to a study by The Urban Institute with support from the Robert Wood Johnson Foundation. The ongoing pandemic and resulting recession have created budget shortfalls in many states, which has revived longstanding debates about the distribution of federal dollars across states. Researchers compared the distribution of federal spending on Medicaid and the Children's Health Insurance Program (CHIP) with states' contribution to the federal treasury. Related: States coming up short on health care affordability Researchers found that redistribution of Medicaid and CHIP funds largely transfers funding from higher-income states to lower-income states. This redistribution mostly occurs because of the higher Medicaid and CHIP federal matching rates that low-income states receive, as well as the smaller tax contributions such states make to the federal treasury. Lower-income states that expanded Medicaid under the ACA generally are the biggest beneficiaries in the distribution of federal funds to states. Although lower-income states that did not expand Medicaid still largely benefit from receiving federal funds under current law, the research shows almost all non-expansion states would become even larger net recipients of federal funds if they were to expand Medicaid eligibility requirements. For example, if North Carolina and Georgia were to expand Medicaid eligibility in accordance with the ACA, the states would receive an additional $5.5 billion and $3.9 billion, respectively, in federal funds annually through Medicaid. This analysis produced three central findings, according to researchers: |

1. Medicaid and CHIP spending significantly contributes to the distribution of federal funding across states.
2. Funding generally is redistributed from high-income states to low-income states through the traditional Medicaid and CHIP programs.
3. There is considerable redistribution from some low-income states to other states in the financing of the ACA's Medicaid expansion, because of the former having refused to expand Medicaid eligibility.

Many higher-income come states receive high shares of total federal Medicaid and 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 ans CHIP spending (and have less generous programs per low-income resident), but their residents and business make even smaller contributions to the treasury. "We also show that states that have not expanded Medicaid eligibility under the ACA make net contributions to the other states that have expanded, and many of these non-expansion states have low per capita incomes," researchers concluded. "If the remaining states were to expand Medicaid eligibility, however, they would receive more in federal dollars than they contribute in taxes, as is the case with the traditional programs." Read more: |

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