Federal funding continues to be a Catch-22 for states across the country. States certainly can’t survive without money from Washington D.C., and all too often, they can’t survive with it.

Take Nebraska, for example. The economy in the Cornhusker State has improved this year, and per-capita income is on the rise. As a result, the federal government has announced they will reduce their Medicaid funding, an unexpected and unwelcome surprise to lawmakers.

Though the one-half of a percentage point change is minor, the result is a reduction of $8 million in funding. Over the last several decades, Medicaid spending has continued to surge as a portion of state budgets. Reduction in funding for the Medicaid program could be problematic, causing budget squeezing for other critical segments like education.

As Nebraska continues to debate Medicaid expansion, lawmakers around the country should be wary of the federal government’s promise to fund the initial years of expansion. Washington’s spending reserves are drying up, and this reduction in funding is just one instance of a growing trend across the nation.

State Budget Solutions (SBS) President Bob Williams strongly urged Nebraska lawmakers to consider the federal government’s recent actions before moving to expand Medicaid:

“The fact that Nebraska is losing federal funds because it is doing well illustrates that no state Medicaid deed goes unpunished by the federal government and ultimately this affects the residents who need it most. We have urged states to consider numerous factors when deciding whether to expand Medicaid. The uncertainty of future federal Medicaid match rates is one of the most important reasons states should proceed with extreme caution.”

Nebraska’s case further illustrates the growing problems in federal-state “partnerships” like Medicaid. The federal government dictates funding levels, while states have little authority to push back against reduction and restriction in funding. States would do well to demand more flexibility, like block grants, that would allow local lawmakers to be in control of state-run programs and provide better care for citizens who need it most.

photo by: RLEVANS

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