Why states should not expand Medicaid

Medicaid was created in 1965 as a joint federal/state program to finance healthcare services for low-income Americans. The program now covers about 73.5 million Americans. The federal government establishes certain requirements, but states manage their own programs—setting payment rates, contracting with insurers to manage enrollee care, and often broadening eligibility beyond federal requirements. The federal government reimburses state expenditures, generally covering half of the cost in the wealthiest states and around three-quarters of costs in the poorest states. During Fiscal Year 2018, the federal government covered 63 percent of total Medicaid expenditures.

The reimbursement percentage was actually higher than this because states have developed accounting gimmicks that generate federal reimbursements for artificial state expenditures. Of note, Congress raised each state’s federal reimbursement by 6.2 percentage points during the coronavirus public health emergency. For Medicaid to meet its core mission, its focus should remain on the truly vulnerable—lowincome children, pregnant women, seniors and individuals with disabilities.

The Affordable Care Act (ACA) expanded eligibility to Medicaid beyond its core and historic populations to cover childless, nondisabled, working-age adults with income below 138 percent of the federal poverty level. States that have resisted expansion have witnessed the soaring costs in other states and the adverse impact on the vulnerable patients already on Medicaid who must compete for providers with expansion enrollees.