New York State Public Assistance Cost-Sharing Policies:
Implications for Federal Policy
PAD-81-11, Dec 16, 1980
The Federal Government divides public assistance costs with States according to the Medicaid formula, which grants aid in direct proportion to per capita income. New York State follows a policy of sharing public assistance costs with county governments on a 50-50 basis. The cost-sharing policies of New York were used as a case study of the impact that varying concentrations of welfare recipients have on the fiscal effort of a State Government administering a public assistance program.
New York's 50-50 cost sharing policy for financing local public assistance programs does not reflect differing concentrations of public assistance recipients. Those counties with large concentrations of welfare recipients incur a greater fiscal burden than do counties with lower concentrations. Therefore, New York aid policies are a contributing factor leading to increased fiscal pressures experienced by some county governments. Similarly, States with large concentrations of welfare recipients also experience a greater fiscal burden than do States with lower concentrations. This creates an incentive for States with high concentrations of recipients to mitigate this additional cost by establishing strict eligibility criteria and/or low benefit payment levels. Recent Federal welfare reform bills which would equalize benefits and eligibility across States would continue to create a greater fiscal effort in those States with large concentrations of recipients. By introducing the percentage of a State population that receives benefits into the Medicaid formula, an incentive would be provided to States with strict eligibility criteria to liberalize their standards, since doing so would reduce the State's share of program costs. In the event that national eligibility criteria and payment standards are established while mandating a portion of program costs on States, then modifying the Medicaid formula would produce an equal level of fiscal effort for all States.