Source: National Review
Medicaid costs taxpayers nearly $900 billion a year. That figure is on track to exceed $1 trillion by the end of this decade.
The entitlement is growing faster than the economy. That kind of growth is unsustainable — and risks shredding the safety net for those who need it most.
Republicans are confronting that mathematical reality as they hunt for savings in a program that now provides health coverage to nearly 80 million people.
Congress created Medicaid in 1965 as part of President Lyndon Johnson’s “Great Society” to provide health coverage to children without parental support, their caretakers, the disabled, the blind, and low-income elderly Americans. Two decades later, lawmakers mandated Medicaid coverage for low-income pregnant women and children. For these groups — often called the “legacy” population — the federal government covers between 50 percent and 77 percent of the cost, depending on the state.
Fast forward to 2010, when the Affordable Care Act expanded eligibility to millions of able-bodied adults making up to 138 percent of the federal poverty level — about $21,600 for an individual. The federal government covers 90 percent of the cost for these “expansion” enrollees.
The promise of matching federal funds provides a strong incentive for states to expand their Medicaid programs. For every dollar they spend, they receive anywhere from $1 to $9 from Washington.
The result? Explosive growth. According to the Manhattan Institute’s Chris Pope, Medicaid’s price tag has roughly doubled every decade over the last 50 years. In 2023, it cost a whopping $870 billion, up 8 percent from the year before.
By 2040, the cost of Medicaid, the related Children’s Health Insurance Program, and the Affordable Care Act’s premium subsidies are projected to consume 2.8 percent of GDP, according to research from the Mercatus Center.
That may not sound like much. But it’s more than double today’s share. And it means that those three programs would consume nearly three dollars of every hundred our economy creates in 2040.
Medicaid is a significant contributor to our nation’s debt burden. As the Mercatus Center’s Charles Blahous recently noted, “Medicare, Medicaid and the ACA together account for over two-thirds of our worsening fiscal problem.” Everything else, from defense to transportation, adds up to less than one-third.
So if we’re to make a dent in our $36 trillion national debt — which now exceeds 120 percent of the size of our economy, more than it was at the end of World War II — Congress must rein in Medicaid spending.
Lawmakers can start by lowering the federal match rate for the expansion population so that it’s the same as for the legacy population. It defies common sense to pay states more to cover able-bodied adults than to insure vulnerable children, the disabled, and pregnant women.
This change alone could save taxpayers up to $690 billion over the next decade, the House Budget Committee projects.
Congress can also rein in states’ ability to expand Medicaid coverage beyond the essentials. Nearly two-thirds of Medicaid spending now goes toward “optional expansions“ of the program — benefits that are beyond what federal law requires.
Eliminating Medicaid fraud would also help. In its most recent audit, Medicaid reported more than $31 billion in improper payments — over 5 percent of total outlays. The Paragon Health Institute argues that the actual fraud rate is much higher — and estimates that Medicaid made $1.1 trillion in improper payments over the last decade.
Critics call Republicans’ Medicaid reform plans cruel. But Medicaid spending would still rise by $189 billion over the next decade if they go into effect — compared to a projected $369 billion increase if nothing changes. That’s hardly slashing the budget.
Medicaid reform doesn’t mean abandoning the disadvantaged. It’s the only way to preserve the program’s future — and protect them. Absent action, Medicaid may collapse under its own weight and crush those who need it most.
