A fairer return on federal dollars for NH
The Medicaid match disproportionately penalizes the Granite State
New Hampshire has traditionally ranked toward the bottom of the nation in the return of federal tax dollars paid by its residents. A key reason is we are disadvantaged relative to most states in the federal-state partnership that is Medicaid funding for the medically indigent. That only compounds the challenge of funding long-term care in the nation’s third-fastest-aging state. Every state dollar spent on Medicaid draws a federal “match” through what’s called the Federal Medical Assistance Percentage, or FMAP. Thus, funding care for seniors and those with disabilities through Medicaid – besides being the right thing to do – has a great return on investment. Most Medicaid funding goes to caregiver wages, and caregivers, in turn, return the money to their states’ economies. The FMAP is based upon a state’s income. Higher-income states receive lower matching rates.
New Hampshire, unhappily, is tied for the lowest-FMAP. For every dollar New Hampshire spends on Medicaid it receives one federal dollar – evenly splitting the responsibility. In contrast, in Mississippi the federal government pays 74.6 percent of the Medicaid bill. This subsidy from states like New Hampshire allows policymakers in poorer states to more easily fund Medicaid while crowing about their fiscal conservatism.
The problem with the FMAP is that any income-based funding formula necessarily assumes you have some means of capturing personal income. New Hampshire does not, as it has no income tax. Of the 11 other states with the lowest FMAP, only Alaska, Washington and Wyoming also have no income tax. Yet Alaska and Wyoming derive enormous revenue from natural resources on federal lands. Oil and gas revenue account for over 90 percent of Alaska’s state budget, for example. Alaska residents even get an annual oil dividend.
Neither New Hampshire nor the state of Washington enjoy such geological good fortune.
Congress should consider making the FMAP formula more uniform. Currently it creates a classic moral hazard where states are effectively rewarded for failing to boost their economies. The “big government”- bashing of other states wears very thin when you realize the extent to which New Hampshire taxpayers subsidize their rhetoric.
A more uniform FMAP need not increase federal spending. It could be offset with a per-capita cap to the overall federal Medicaid commitment — facilitating efficiency in other states and driving down cost. Thrifty New Hampshire, which has long underfunded long-term care, could only benefit. A fairer FMAP could also free up millions in state tax dollars for education, for example.
This reform would be better for accountability, and serving vulnerable citizens, than past congressional capped-financing proposals — such as block grants where states would end up arbitrarily rationing care without any federal oversight. Block grants would be particularly bad for a state like New Hampshire as they would effectively lock in, forevermore, currently-disproportionate federal spending in states with higher FMAP rates and leave states with lower FMAP rates, like New Hampshire, a perpetually inadequate federal appropriation.
For the federal government to especially accommodate New Hampshire would not be without precedent. Even oil-rich Alaska, thanks to the efforts of a king of pork-barrel politics, the late Sen. Ted Stevens, had an alternative FMAP formula in the last decade that simply subtracted 5 percent from the state’s per capita income – boosting the federal match.
This is about much more than just dollars. A lack of adequate state and federal funding is worsening the plight of long-term care staff, whose wages, again, account for most Medicaid reimbursement, as that reimbursement falls far shorter of direct care costs than is the case in most other states. This has fueled a real crisis in retaining and recruiting caregivers. Inadequate funding also impairs important functions of our state’s Department of Health and Human Services.
Getting anything through Congress, even a budget, is challenging. Yet the budgetary process carries with it the opportunity for our members of Congress – particularly our U.S. senators – to work, perhaps in concert with their Washington colleagues, to address this inequity for New Hampshire. To produce more funding for our state with no tax increase would be quite a novelty, and one worth trying for.
Brendan Williams is the president and CEO of the New Hampshire Health Care Association.