Medicaid: End It, Don’t Mend It

The Issues & Insights editorial board make the provocative case that Medicaid is so completely corrupted that it cannot be saved without destroying the public fisc.  They offer two valid alternatives:

https://issuesinsights.com/2025/05/19/medicaid-end-it-dont-mend-it/

Medicaid: End It, Don’t Mend It
By I & I Editorial Board - May 19, 2025

As soon as Republicans mentioned cutting spending on Medicaid as part of their “reconciliation” bill, the usual suspects started rolling out their standard talking points. They’re cutting health care for the poor to pay for tax cuts for the rich! Millions will lose coverage! The disabled will suffer! Oh, the humanity!

Well, if the GOP is going to be accused of destroying Medicaid when all they are proposing is a minor haircut, why not go all out and scrap this hopelessly flawed, fraud-riddled, budget-busting disaster of a program and start over from scratch?

First, let’s dispense with the claim of “devastating” cuts to Medicaid. The House reconciliation bill would reduce Medicaid spending by $625 billion. That might sound like a lot, but it’s stretched out over 10 years, at a time when Medicaid is on track to spend $8.6 trillion. Medicaid spending will still go up every year under the House bill, just a tiny bit more slowly.

What Republicans should really be talking about is giving Medicaid the USAID treatment. Shut it down and start over from scratch.

Let’s line up the reasons.

It was sold on a lie. The original claim made in the mid-1960s was that the federal government and the states would split the cost of Medicaid. But that happened only once: in the program’s first year. Ever since, the federal share has grown while the states’ shares have shrunk. By 2005, states were paying only 42% of Medicaid’s bills. In 2022, the state share dipped below 30%.

Over the past 60 years, states have pressured federal lawmakers to make a multitude of exceptions to the 50-50 split, which lawmakers were only too happy to provide because there is no cap on federal Medicaid spending.

It is ripe for waste and fraud. This financing scheme, in turn, gives states little incentive to run their programs efficiently. Why should they? They are paying only a fraction of the costs. Plus, for every dollar of waste or fraud a state eliminates, it loses even more money from the feds.

“Official government reports conservatively estimate that improper Medicaid payments total half a trillion dollars over the last decade, but outside estimates place that figure closer to $1.1 trillion,” notes the Cato Institute’s Dominik Lett.

In other words, just cutting out waste and fraud would more than cover the “cuts” the GOP is proposing.

But that will never happen so long as states are paying pennies on the dollar for Medicaid.

States use Medicaid to steal federal money. On top of this, as we pointed out in this space earlier, states also figured out how to game the system through “provider taxes.” The way it works is that states impose a special tax on Medicaid providers, boost Medicaid reimbursement rates to cover the cost of the tax, and then send the bill to Congress. Congress has tried to rein in this abuse, but to no avail.

Back in 2011, when Joe Biden was vice president and more mentally capable, he called this a scam, said states were gaming the system, and said there was no reason for Congress not to stop it. The Congressional Budget Office says the 10-year cost of this one racket is $600 billion – almost exactly what the GOP wants to cut. (See “Dems Fight To Protect A $600 Billion Medicaid Tax Scam That Joe Biden Tried To Kill.”)

Spending is out of control. It should come as no surprise, then, that Medicaid spending is exploding. Over the past 10 years, Medicaid’s costs have gone up by more than 68%. They are on track to climb another 56% over the next 10 years.

The quality of care is lousy. Even with these massive costs, quality of care is far from optimal. A Kaiser Family Foundation survey finds that more than half of Medicaid enrollees say they’ve had a problem with their insurance in the past year, with 26% saying they couldn’t get recommended care and 22% saying they experienced “significant” delays in getting care.

An NIH study found that “Medicaid patients have greater difficulty obtaining appointments compared with privately insured patients across a variety of medical scenarios.” An article in Health Affairs found that far fewer doctors were accepting new Medicaid patients than either Medicare or privately insured ones.

The reason is that Medicaid pays doctors less than either Medicare or private insurance, and piles on mountains of paperwork.

Tweaking the program won’t solve any of these problems.

The only real solution is to scrap Medicaid and figure out a 21st-century solution to providing quality health care to the nation’s poor.

An obvious first step would be to get the federal government out of the picture entirely. Just send the Medicaid money to states in the form of a fixed block grant and let them figure out how to efficiently care for their poor.

Or better still, stop taking hundreds of billions of tax dollars out of states only to give the money back – minus federal overhead costs and with a multitude of strings added.

The left would scream bloody murder. But the only losers would be the legions of Medicaid grifters and fraudsters who are getting rich while pretending to care for the poor.

Two important graphics and lots of links at the hyperlink, above.

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