This is one of two arguments for and against Medicaid cuts. Read why Medicaid should not be cut here.
We need to reform Medicaid in order to save it. Without implementing commonsense cost and accountability measures, the program will collapse under its own weight.
According to state Medicaid agencies, roughly 80 million people are enrolled in Medicaid. It’s quite often the largest and fastest-growing line item in state budgets and accounts for 1 in every 3 dollars spent in some states. With enrollment well above pre-pandemic levels and spending forecasted to reach nearly $7.5 trillion over the next decade, Medicaid is in dire need of reform.
Fortunately, we know exactly where Medicaid went wrong, and there’s still time to fix it. Medicaid was originally designed to be a safety net for the truly needy, but the program became a hammock for millions of able-bodied, working-age adults under the Affordable Care Act’s Medicaid expansion program. Add to this sky-high improper payments — reaching as much as 22 cents for every dollar spent on the program — and with many able-bodied adults enrolled in the program failing to work at all, it becomes clear that Medicaid’s trajectory is unsustainable.
Reality gets ugly when Medicaid becomes unsustainable. Take Indiana, which announced a $1 billion Medicaid shortfall in 2023 and then cut payments to the caretakers of children and seniors with severe disabilities. As the families of Medicaid’s neediest enrollees protested outside the Statehouse, able-bodied adults continued to collect benefits.
When the federal government sweetened the deal to persuade states like Indiana to expand Medicaid, it offered to reimburse states for 90 percent of all Medicaid spending on their able-bodied expansion population, known as the Federal Medical Assistance Percentage, or FMAP for short.
This stunning rate eclipses the reimbursements offered for traditional Medicaid enrollees, which can be as low as 50 percent in some states. As seen in Indiana, this disparity incentivizes states to prioritize expansion of enrollees over our most vulnerable citizens.
This is precisely why we need to enact commonsense reforms to preserve Medicaid for the most vulnerable — seniors, people with disabilities, and low-income children. By adjusting FMAP to eliminate the expansion bias, we can refocus Medicaid on the truly needy and save $561 billion over the next decade, according to the Congressional Budget Office.
Another smart place to start would be commonsense work requirements for able-bodied enrollees, roughly 60 percent of whom don’t work at all. Requiring able-bodied adults to work, train or volunteer for just 20 hours per week would ensure Medicaid remains available as a safety net while encouraging self-sufficiency. The Foundation for Government Accountability estimates that a work requirement would save $241 billion over 10 years.
To tackle the program’s massive overpayments, Congress can require more frequent eligibility checks, achieving another $273 billion in savings over 10 years. These cost savings directly protect scarce dollars from being siphoned toward enrollees who aren’t eligible for the program.
Crucially, not a single one of these changes would involve cutting Medicaid for groups that need it. Instead, they would protect the truly needy, help get able-bodied adults back to work and keep limited resources out of the hands of those gaming the system.
We have a once-in-a-generation opportunity to restore Medicaid to its original purpose as a true safety net for the most vulnerable — not a giveaway to able-bodied adults and fraudsters. Let’s seize the moment and correct the course for Medicaid before it’s too late.
Hayden Dublois is the data and analytics director at the Foundation for Government Accountability.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
