Americans Can No Longer Afford Medicaid
U.S. House Republicans recently released a list of proposals for slashing federal spending by as much as $5.7 trillion. A significant portion of the proposed savings — a whopping $2.3 trillion — would come from Medicaid.
Progressives are decrying the GOP document as a heartless assault on an essential safety-net program.
But Medicaid has grown far too large and expensive in recent years. Republicans are right to pore over it for savings.
The program was created as a health insurer of last resort for low-income Americans.
So one might expect that, during a period in which incomes have gone up and Americans have grown wealthier, fewer people would depend on the program for their coverage.
The opposite has happened. Between 2013 — the year before Obamacare's Medicaid expansion took effect — and 2024, enrollment grew by 38% to nearly 80 million. This was during a period in which the median household income grew by over 54%.
Today, Medicaid is the single largest provider of health insurance in the country.
At a time when federal spending — particularly healthcare spending — is growing unsustainably, it only makes sense to rethink how Medicaid is financed.
Perhaps the most promising idea advanced by House Republicans involves capping how much the federal government pays to states per Medicaid enrollee.
At present, the program is funded through an open-ended arrangement wherein the federal government matches what states spend on Medicaid patients based on one of several formulas.
The upshot is that states receive at least one dollar from the federal government for every dollar they devote to Medicaid.
It should come as no surprise, then, that Medicaid continues to consume more and more of state budgets, accounting for 18% of all state-funded spending.
A per-capita cap would eliminate these perverse incentives — and encourage states to spend their Medicaid dollars wisely. By the House GOP's estimate, this one reform alone would save the federal government $918 billion over 10 years.
Republicans have also proposed equalizing the federal match for enrollees who have received coverage because of Obamacare's expansion of the program with that for the legacy population.
Doing so would correct one of the law's most egregious features.
Obamacare extended Medicaid eligibility to all Americans earning up to 138% of the federal poverty level.
In order to entice the states to expand their Medicaid programs, the law saddled the federal government with covering 90% of the cost of caring for this newly eligible population.
For legacy Medicaid enrollees — the destitute, disabled, pregnant women, and children for whom the program was created — federal matching payments are far less generous, totaling between 50% and roughly 77% depending on the state.
This disparity has never been fair, much less economical.
So it's encouraging that the GOP's proposal would ratchet the match for the expansion population down — and save the federal government $690 billion over a decade.
Another idea worth revisiting is implementing work requirements for able-bodied Medicaid enrollees.
In an era of scarce taxpayer dollars, it makes little sense to pay for public health coverage for people who should be able to take care of themselves.
President Donald J. Trump's nominee for the Office of Management and Budget (OMB), Russell T. Vought, recently expressed his support for the policy.
So the prospects for implementing work requirements have never looked better.
Sweeping structural reforms aren't the only way to get Medicaid's finances in order.
The Trump administration can generate substantial savings simply by reducing waste, inefficiency, and fraud in the program — which, from all indications, run rampant.
In 2024 alone, the federal government reports that improper payments accounted for more than 5% of total Medicaid spending — more than $31 billion.
The GOP's focus on cutting Medicaid isn't merely defensible — it's necessary.
Democrats might treat any reduction in Medicaid spending as a travesty. But that position is nothing more than an article of faith — one that Americans can no longer afford.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare 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.com @sallypipes. Read Sally Pipes' Reports — More Here.