A Per Capita Cap for Medicaid: Solution in Search of a Problem?

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There is talk in Congress about cutting federal Medicaid spending in the context of a big budget reconciliation bill that would also cut taxes. One idea, in particular, is being floated: A “per capita cap,” which would limit federal spending on Medicaid on a per enrollee basis and cap growth over time. Politico reports that House Energy and Commerce Committee Chair Brett Guthrie (R – KY) is exploring the idea, saying: “It’s not cutting the program. We want to make it sustainable. Eventually, it is going to crash if we don’t fix this.”

Health care costs in general have grown faster than the economy over time, and that’s a challenge. But, Medicaid is in some respects the most efficient part of our health care system, with payments rates to providers substantially below those in commercial insurance. Medicaid has been expanded over time to cover more people, but spending growth has been much lower than other payers on a per enrollee basis. Medicaid per enrollee spending has grown 30% since 2008, compared to 50% for Medicare and 80% for private insurance.

A per capita cap in Medicaid may be a solution in search of a problem. However, if a cap substantially reduced federal Medicaid spending over time, it would put states at financial risk and force cuts to services and rates paid to physicians, hospitals, and nursing homes.