Abstract
In the context of dramatically increasing U.S. health‐care costs, this paper contributes to an ongoing debate discussing proposals to replace the government’s current policy of matching state Medicaid spending with a block grant system. State‐level panel data analysis provides evidence that, ceteris paribus, increasing the federal matching formula has a negative impact on prenatal care. This aggregate result masks significant differences between high‐ and low‐spending states and appears to be driven by the high‐spending states thus implying that a 2‐track approach to Medicaid funding may be more appropriate than the current system. (JEL I1, H7)
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