Federal Dollars and State Flexibility: The Debate Over Medicaid's Future

As it enters its 30th year, Medicaid is at a critical juncture. At a cost of $258 billion to federal and state governments in 1995, Medicaid is both the mainstay of financing for health insurance and long-term care for 37 million low-income and aged and disabled Americans, and a substantial and growing federal and state budgetary commitment (Holahan and Liska 1995). The rising cost of maintaining the Medicaid safety net underlies a growing tension in the federal and state partnership for Medicaid and the debate over new approaches for the future. Beyond the structures and formulas of intergovernmental relationships, however, lies a program that finances America's most complicated and intractable health care concerns. With Congress struggling to balance the federal budget, Medicaid is now at the center of a fiscal and philosophical tug-of-war between the federal and state governments over how responsibility is divided over program structure and costs. How these issues are resolved will determine how the US as a nation provides health and long-term care to poor, sick, old, and disabled Americans.