Capped Federal Medicaid Funding: Implications for Texas

Prepared for the Texas Alliance for Health Care

Since its inception, Medicaid has been financed jointly by the federal and state governments. There are no caps on the federal government’s core financial obligations; federal funding is guaranteed as a share (known as a match) of all state expenditures that follow federal rules. Republican congressional leadership and President Trump are seeking to replace the current matching system with a fixed allocation of federal dollars paid through block grants or per capita caps.

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In a new white paper prepared for the Texas Alliance for Health Care, Manatt Health draws on recent proposals to examine the factors that go into calculating the amount of federal dollars that would be allocated to each state in a capped funding model and considers how they might play out for the State of Texas. Because capped funding proposals generally provide states with greater flexibility than the current Medicaid funding model, the paper also reviews the type of flexibilities that might be available to Texas under such proposals.