Written by John R. Graham
Congress created Medicaid in 1965, to fund state's health-care programs for low-income residents. The original formula was a minimum 50/50 split between state and federal funding. However, states with more low-income residents were supposed to receive higher federal transfer payments. (It didn't quite work out that way. Actually, states that were ready, willing, and able to ratchet up state taxes and spending were able to pull down more federal dollars. See measurement no. 4, "Medicaid Freeloading", in the U.S. Index of Health Ownership, 3rd ed., p. 18.)
Medicaid has grown out-of-control in the last four and a half decades, because there is nothing preventing states from competing against each other in a "race to the bottom" for federal funds. Last February, Congress and President Obama made it worse, through the so-called "stimulus" bill (ARRA), which bailed out state Medicaid programs by increasing federal matching funds temporarily.
Florida's federal match went from 55% to 68% for the duration of 2009. That is, for every dollar Florida spends on Medicaid, the federal government matches it with $2.12, instead of the previous $1.22.
Now that there's less than two months left of this extra "cream", Florida's Medicaid profiteers (i.e. state legislators) are lobbying to ensure that the matching rate does not return to it's historical level.
Incredible! They've only enjoyed this extra match for eight months, and they act like the state will slip into the Atlantic ocean if the match goes back to what it was for decades previously!
Federal funding cannot salvage bankrupt state Medicaid programs. It merely feeds the addiction.