A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation discusses per capita caps, a proposed reform to Medicaid that would limit the amount of federal spending per beneficiary. The proposal’s supporters contend that it could help control the growth of federal spending on Medicaid. Critics disagree, saying that instead of slowing the rate of spending growth, it would only shift the costs to the state, ultimately limiting poor Americans’ access to care.

Topics covered in this brief include:

  • What’s the proposal? This program would link spending growth to enrollment and not rising per beneficiary spending as is the case now. Medicaid currently covers 60 million Americans and accounts for roughly 8 percent of the US federal budget, not counting state contributions. Per capita caps are generally considered a middle ground between Medicaid’s current approach and other proposals that would use block grants to fund the program.
  • What’s the debate? Although people believe the per capita cap approach would incentivize states to be efficient, others question whether a per capita cap would truly save the federal government money. Much of the growth in Medicaid spending over the past decade has been due to increases in enrollment. Also, spending per enrollee has grown at a slower pace than total Medicaid spending. The brief highlights major criticisms of this proposal.
  • What’s next? Whether a Medicaid per capita cap will emerge as part of entitlement reform efforts is unclear. Caps were floated during the recent fiscal cliff budget negotiations, but no specific proposal was offered by either Congress or the White House.

About Health Policy Briefs

Health Policy Briefs are aimed at policy makers, congressional staffers, and others who need short, jargon-free explanations of health policy basics. The briefs, which are reviewed by experts in the field, include competing arguments on policy proposals and the relevant research supporting each perspective.

Previous policy briefs have addressed:

  • The Multi-State Plan Program. To boost competition in new insurance exchanges, the federal government will select and oversee at least two nationwide plans.
  • The CO-OP Health Insurance Program. Twenty-four “consumer operated and oriented plans” will offer coverage through health insurance exchanges.
  • Patient Engagement. People actively involved in their health and health care tend to have better outcomes–and, some evidence suggests, lower costs.

You can sign up for an e-mail alert about upcoming briefs. The briefs are also available from the RWJF’s Web site. Please feel free to forward to any of your colleagues who are tracking health issues, and we welcome your feedback at hpbrief@healthaffairs.org.