Matching Rates and Mandates: Federalism and Children's Medicaid Enrollment

An important focus of the federalism literature has been on analyzing the responses of lower levels of government to the financial incentives of intergovernmental grant programs. But grant conditions and mandates are also important features of grant programs, and these have received considerably less attention in the literature. This article examines the implementation of federal Medicaid mandates during the 1980s and 1990s to explicitly compare the relative responses of the states to matching rate incentives and statutory mandates. Using individual-level information on program enrollment to measure policy implementation, the results indicate that the federal mandates led to large changes in children's Medicaid enrollment. In contrast, the effects of the federal matching rate were much more limited. Moreover, the statutory mandates not only raised the average level of enrollment but also reduced the degree of policy variation across the states. While the current pattern of federal Medicaid matching payments reduces policy variation to some extent, these effects are modest compared to the impacts of the mandates. Mandates are a more powerful instrument for national policymakers than the comparatively weak fiscal incentives provided by matching rates.