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This policy brief explains the current Medicaid financing arrangements between federal, state and local governments, examines the role of Medicaid in federal and state budgets, and identifies severalimportant considerations on evaluating proposals to limit federal Medicaid spending.

This policy brief examines the projected impact of a 5% expenditure growth cap on Medicaid expenditures over the period 1996 to 2002. It highlights the differential implications that would result under this type of proposal.