Medicaid and the Costs of Federalism, 1984-1992

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While assistance programs for the poor have never been as popular as those for the elderly, one such program, Medicaid, became a favorite target for expansion by state and national policymakers during the fiscally conservative 1980s and early 1990s. As a result, Medicaid's expenditures began to grow at rates double that of Medicare which serves the elderly. The author explores the complex political and institutional factors, as well as the contribution of one exceptionally motivated individual, Henry Waxman, in promoting this unusual situation.Why was Medicaid singled out as virtually the only health care program expanded by Congress during these years? The answer is in the nature of the policy itself -- Medicaid's shared financing mechanism -- in which program costs are paid for jointly by the federal and state governments. Such an arrangement diffuses responsibility, increasing opportunities for shifting costs, blame, and/or credit between levels of government. This study presents numerous examples in which the federal government and states expanded the Medicaid program to serve their own interests, while shifting part or all of the cost to the other level of government. The end result was a dramatic increase in Medicaid expenditures, while those of Medicare program, funded by a single level of government, leveled off.