Medicaid In Context

Medicaid spending was mentioned in the media a lot during the debate leading up to the passage of the Big Beautiful Bill earlier this month.

To hear the Democrats and media speak about it you would think that the new law drastically cut Medicaid.

Let's put the Medicaid issue in context with some hard facts and truths.

The reality is that the only major change to the Medicaid rules was to limit federal funding for able-bodied adults aged 19-64 in those states that previously expanded Medicaid to those with higher incomes than existed in original Medicaid. 

In the Obamacare legislation of 2010, states were given the option to expand Medicaid to those with higher incomes above the base poverty level (up to 138% of the federal poverty level)  with the federal government paying 90% of the cost.

41 states have chosen to expand Medicaid as of the beginning of 2025.

Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, and Wyoming have not adopted expansion citing costs and philosophical objections.

The new federal requirement is that an individual to be Medicaid eligible in those 41 states must engage in at least 80 hours per month (20 hours per week) of "community engagement" activities to maintain eligibility. Qualifying activities include working, participating in a work program, community service, or education. Exemptions apply to pregnant women, parents of children under 14, people with disabilities, and certain caregivers.

The intent of the provision is to make sure that Medicaid continues to be available to those it was originally intended to help.

Medicaid was originally enacted to provide access to healthcare for the disabled, the blind, those below the poverty line or the elderly who had no assets and required long term care.

It was not intended to provide health care for able-bodied people who could work.

There is not anything in the legislation that prevents a state from allowing able-bodied people to remain eligible for Medicaid. Those states will just be prevented from receiving the federal funding.

California, New York or another Democrat-run state that wants to provide expanded Medicaid benefits to able-bodied people is free to do so. The taxpayers of that state will just have to pay for it.

For historical context, Medicaid did not even exist until 1965. Neither did Medicare.

Is it just a coincidence that health care costs as a percent of GDP just happened to explode as a share of GDP right after these two programs were enacted?

From 1900 to the mid-1960's health care costs in the United States generally were less than 1% of GDP.

Those costs started to consume a greater and greater share of the nations's economy since Medicare and Medicaid were enacted until today where it is close to 10% of GDP.

Isn't it incredible  to see what happens to costs when someone else is paying the bill?

Source: https://www.usgovernmentspending.com/healthcare_spending

Medicaid spending is now approaching $1 trillion per year with the federal government paying about 70% of the total costs and states paying 30% on average.

Total Medicaid Expenditures 1966-2023
Source: https://www.statista.com/statistics/245348/total-medicaid-expenditure-since-1966/

There are over 83 million enrolled in Medicaid coverage in the United States representing over 20% of the total population.

39% of all children in the nation are covered by Medicaid.

Medicaid Enrollment (1966-2023)
Source: https://www.statista.com/statistics/245347/total-medicaid-enrollment-since-1966/

In seven states and the District of Columbia more than 25% of the population is on Medicaid.

For example, in California 38% (15 million of the 39 million residents) in the state are on Medicaid.

43% of the children in the state are on Medicaid. 

California is spending $124 billion per year on Medicaid of which $82 billion comes from the federal government and $42 billion is paid by the state.

Who knows how many illegal immigrants are on Medicaid in California?

In New York, 35% are on Medicaid. It is 40% in Louisiana.

Nationally, more than 40% of all births are paid by Medicaid each year.

However, in Louisiana almost 2/3rd's of births are paid by Medicaid.

Here are a list of the states that are above the national average in regards to Medicaid births.

Source: https://www.marchofdimes.org/peristats/data?reg=99&top=11&stop=154&slev=1&obj=18

Utah has the lowest percentage of Medicaid births---18% followed by New Hampshire at 21%.

Is the Medicaid program actually providing an incentive for the poor to have more babies since the rest of us our paying for it? My son and daughter-in-law had a baby a couple of years ago. He had good private healthcare coverage but it was a high deductible health plan like most in the private sector have today.

It cost my son and his wife more than $5,000 in out of pocket costs to have the child. Compare that to a Medicaid mother where the taxpayer is picking up the cost. Who is more likely to have the next child?

Are the Medicaid eligibility requirements too broad even after the recent reforms? Bear in mind that the new Medicaid rules would do nothing about changing the eligibility for pregnant mothers or children.

Are poor people having that many more babies than those with more money due to the financial incentives?

Most people do not realize the extent to which Medicaid spending has crowded out the spending that states have traditionally focused on in their budgets---primary and secondary education, higher education, roads and highways and law enforcement.

For example, in my home state of Ohio, 12% of the state's $3 billion general fund budget went to Medicaid and 54% went to education in 1975.

In 2025, 47% of the state's $44 billion general fund budget went to Medicaid and only 33% went to education.

Education was the highest budget priority in the state budget in 1975.

Today it is Medicaid by a large margin. 

Medicaid is literally crowding out all other state spending in Ohio and most other states.

Educators continually argue in Ohio that the state (the taxpayers) is not funding education like it should. Their argument has merit but the focus should be on Medicaid spending rather claiming that taxes should be increased.

These are the facts but Democrats and the mainstream media portray the Medicaid reforms as if the world is going to end.

The reality is that if health care costs are not reined in we will soon have a federal budget which only consists of two major items---health care and interest expense.

Medicare, Medicaid and other government health care programs already cost almost $300 billion more per year than Social Security.

The United States government spends twice as much on health care as it does on national defense.

Interest on the national debt is more than $1 trillion per year.

If we can't reform Medicaid to require that able-bodied adults do something more than collect government benefits what hope do we have to insure that the people that really need health care can continue to receive it in the future?

How are these reforms unreasonable, irresponsible or inhumane?