By Tim Ransdell

President Clinton wants to control Medicaid costs by robbing from California's poor and giving to New York's poor.

In a soon-to-be-released plan, Clinton is expected to propose a state-by-state "per capita cap" on Medicaid growth.

While capping Medicaid spending per patient sounds reasonable, doing so differently in every state would exacerbate differences among states in health care for the poor, and would perversely reward some states for having not controlled their costs.

Medicaid has grown rapidly in recent years -- the federal share is more than $100 billion this year -- and controlling its future growth is important. But using a state-by-state per capita cap would be unfair to California.

It would give some states carte blanche to spend generously on new Medicaid patients -- and rake in the federal matching dollars -- while constraining other states to a relatively meager amount per new patient.

Today, California receives a small relative share of federal Medicaid dollars, given how many poor patients we treat. California serves nearly twice as many indigent Medicaid patients as New York -- 5 million or 14.5 percent compared to 2.9 million or only 8.5 percent. Yet California
receives less than 10 percent of federal Medicaid funds, while New York receives more than 15 percent.

The reason: New York spends more than three times as much to care for each patient as does California. In 1994, California served its 5 million poor patients with combined state-federal funding of $10 billion, while New York served 2.9 million persons with a combined $18.7 billion.

Thus, California spent $2,000 per patient, while New York spent $6,450. (The national average was $3,167.)

The state-by-state per capita cap concept financially favors states which already provide rich levels of medical service to a relatively narrow range of patients.

Since more federal funds would be provided only if Medicaid enrollment increases, such states could simply expand coverage and rake in federal dollars at a high matching rate.

Since California now provides very cost-efficient service to a very broad range of patients, our potential for growth would be severely limited.

According to GAO, California ranks lowest among states in spending per patient, yet we are 6th in breadth of patient coverage.

Since Medicaid reimburses state spending with federal matching funds, lower-spending states understand they will receive lower federal payments.  The matching aspect of Medicaid has served as an incentive to state spending. Some states have chosen to avail themselves of that incentive, at
considerable cost to themselves, while other states have not. This system is fair.

Quite to the contrary, however, a state-by-state per capita cap proposal would unfairly end that incentive, penalize states such as California which have worked hard to control spending on medical care, and reward inefficient states for their past exorbitance.

A per capita cap would permanently lock in the high federal receipts of free-spending states, and prejudice cost-conscious states.

Thus, a new Medicaid patient in New York would have the benefit of manymore federal dollars than his or her counterpart in California -- at California taxpayers' expense.

New York is by no means the only free-spending state which would benefit disproportionately.

Generally, Northeastern states would be the gainers, and the South and West the losers.

Rather than a state-by-state per capita cap on federal Medicaid spending, it would be fairer to move instead toward per capita parity.

Allocating Medicaid funds according to numbers of poor persons would be vastly more equitable.

One alternative would be a nationwide per capita cap at the national average level, perhaps with a phase-in period. This would ensure that a new Medicaid patient in California would be equal to a new Medicaid patient in every other state.

California successfully manages to serve more Medicaid patients with fewer federal dollars. The state, its taxpayers and its poor patients should not be punished for its success. California's strong congressional delegation, Legislature and governor understand these nuances. Their challenge now is
to explain it to Washington.
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Ransdell is executive director of the California Institute for Federal Policy Research, a bipartisan, Washington, D.C.-based nonprofit organization, which advises the California congressional delegation on issues of economic concern to the state.