Trapped in America's Safety Net

When the nation’s public health insurance programs were created in 1965, the same dichotomies between insurance and assistance and between federal and joint federal-state responsibility were adopted. Medicare, for senior citizens, would be a federal-level social insurance program with nationally uniform eligibility criteria and benefits. In contrast, Medicaid, for the poor, would adopt AFDC’s hybrid federal-state structure: the federal government would pay part of the cost and stipulate minimum eligibility criteria and benefits, but states could determine the scope of benefits and eligible populations beyond those minima as well as set provider reimbursement levels (which ultimately affected recipients’ access to health care). 8 Program funding differed as well. Medicare financing came entirely from federal and recipient sources: a payroll tax for Part A hospital insurance, and general federal tax revenues and monthly premiums for Part B supplemental medical insurance. In contrast, states were on the hook for part of Medicaid’s financing, which they shared with the federal government. That is, states had to spend their own dollars in order to receive federal matching money. Despite a matching formula that provided a greater federal contribution in poorer states, the robustness of the program would nonetheless come to depend on each state’s fiscal capacity. To this day, means-tested social assistance programs bear the marks of their birth in the crucible of American racial politics and states’ rights. 9 For our purposes, what matters is that the states, both then and now, play a central role in these programs. Today, state fiscal capacity and to a lesser extent ideology are what shape social assistance provision. But the result is the same: vast interstate differences in policies and outcomes.