How Would the Administration’s Proposals Reduce Federal Medicaid Spending by $24.7 Billion Over Five Years?
Medicaid is administered and financed jointly by the federal government and the states, with the federal government matching from 50 percent to 76 percent (depending on the state) of the costs that states incur in purchasing health and long-term care services for eligible low-income people. Under this federal-state matching arrangement, there are two ways that the federal government can reduce its Medicaid spending. It can achieve efficiencies in the purchasing of needed services for Medicaid beneficiaries. An example of this approach— which reduces both federal and state costs— would be to increase the rebates that drug manufacturers are required to pay Medicaid for the prescriptions that Medicaid covers. This would lower the net price of these prescriptions to the program, resulting in savings for both the federal and state governments. In the alternative, the federal government could also reduce its spending by limiting the state Medicaid expenditures that it is willing to match, th
