Congressional Republicans are trying to figure out what to do with Medicaid. Nearly 80 million Americans get health coverage through the entitlement. In California, one in three residents has Medi-Cal, the Golden State’s version of Medicaid.
Congress will have to rein in the program at some point. Spending on the entitlement has roughly doubled each of the last five decades. Enrollment is 7.6 million people higher today than it was at the beginning of the COVID-19 pandemic.
Lawmakers must find ways to scale back Medicaid. They can start by returning it to its original intent: providing health coverage to vulnerable people who cannot provide for themselves.
President Lyndon B. Johnson created Medicaid in 1965 as a joint federal-state safety net for the disabled, blind, low-income elderly, and children who depend on public support. In the 1980s, Congress added coverage for low-income pregnant women, infants, and children.
The federal government pays between 50% and 77% of costs for this “legacy” population, depending on the state.
Thirty years later, the Affordable Care Act expanded Medicaid eligibility to millions of able-bodied adults earning up to 138% of the federal poverty line, about $44,000 for a family of four.
The feds cover 90% of costs for this group. Roughly 25% of Medicaid recipients nationwide, and 34% of enrollees in California , are part of this “expansion” population.
This financing structure encourages states to expand their programs. Every dollar they direct towards Medicaid draws down between $1 and $9 from Washington.
This gravy train has to come to an end. Republicans are proposing to apply the brakes slowly. One idea is to reduce the annual rate of Medicaid spending growth from 2.4% to 2%. Democrats have howled about this supposedly debilitating cut.
Only in Washington are increases in spending branded as cuts. As Steve Forbes wrote earlier this month, “Even with the proposed slowdown, Medicaid spending would still increase by roughly $1.5 trillion over the next decade.”
Republicans’ proposed changes to Medicaid are reasonable.
One idea is to treat the expansion population the same as the legacy population. States take in more federal money when they enroll healthy, working-aged, mostly childless adults than they do when covering pregnant women or the blind. So they have an incentive to prioritize enrolling members of the expansion population over members of the legacy population.
That’s tantamount to discriminating against the vulnerable. And they suffer as a result. A 2018 report from the Foundation for Government Accountability found that more than 650,000 disabled people were on waiting lists for home and community based services from Medicaid. Nearly half of these people lived in states that had expanded Medicaid.
Equalizing the federal match rate, so that states receive the same amount of money for expansion enrollees as they receive for non-expansion enrollees, would save taxpayers up to $690 billion over a decade.
Another worthy idea is to remove people from Medicaid who are not eligible under the law. Earlier this year, the Wall Street Journal reported that taxpayers spent billions of dollars covering people who claimed Medicaid coverage in more than one state.
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A third idea is to eliminate the money laundering schemes states use to rake in more than their fair share of federal funding. Take provider taxes, which allow states to levy a tax on healthcare providers, redirect that money towards Medicaid, and thus attract additional matching funds from the federal government.
Every state but Alaska currently has some sort of provider tax. Banning them altogether would save the federal government $612 billion over 10 years.
Republicans shouldn’t shy away from their proposals to reform Medicaid. They’re doing what it takes to preserve the program for those who need it most.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It” (Encounter 2025). Follow her on X @sallypipes.
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