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This background paper updates NHPF Issue Brief No. 760, "The Federal-State Medicaid Match: An Ongoing Tug-of-War over Practice and Policy," December 15, 2000. The paper presents actions taken since then by the Centers for Medicare and Medicaid Services, Department of Health and Human Services, to address what the Bush administration calls abusive funding practices used by states to draw federal Medicaid matching funds. Tracing the Clinton and Bush administrations' policies, the document reviews final regulations, published in January 2001 and January 2002, on these practices. The paper also reports on a lawsuit filed in federal court to block the January 2002 regulations. In addition, it explores the implications of CMS' actions for the federal government, as well as for the Medicaid disproportionate-share hospital adjustment and the hospitals serving low-income people that the adjustment was meant to protect.

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