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The Tangled Web of Medicaid: A Call for Reform
A recent headline declared, “Trump’s White House return poised to tangle health care safety net.” Critics predict that Trump’s policies would:
- Increase the uninsured rate,
- Create new barriers to abortion,
- Erode consumer protections under the Affordable Care Act (ACA),
- Add work requirements to Medicaid,
- Impose funding cuts on safety net insurance,
- And challenge federal health agencies tasked with safeguarding public health.
The last point is particularly striking given the immense harm caused by agencies like the FDA, CDC, and NIH during the COVID-19 pandemic. A challenge to these agencies seems long overdue.
Rather than refuting these accusations point by point, consider the reality: the U.S. medical safety net is already a tangled, inefficient system that spends excessively while failing to provide adequate care. The root cause? Overregulation by Washington.
Medicaid’s Expanding Burden
When Medicaid was established in 1965, it aimed to enhance benefits for a small segment of Americans under the Old-Age, Survivors, and Disability Insurance System. Initially, 4 million Americans were enrolled. By December 2022, after decades of expanded eligibility, Medicaid covered 92.3 million people—27.6% of the U.S. population.
With this expansion came soaring costs. In 2023, Medicaid consumed 10% of the federal budget. This growth has been fueled by the joint federal-state funding mechanism, FMAP (Federal Medical Assistance Percentage). FMAP incentivizes states to spend more, as federal contributions increase in proportion to state Medicaid budgets. This system encourages spending rather than cost-saving.
The Cost of Bureaucracy
Beyond rising medical costs, Medicaid is burdened by the escalating expense of BARRCOME—bureaucracy, administration, rules, regulations, compliance, oversight, mandates, and enforcement. This accounts for 31% to over 50% of all U.S. healthcare spending, translating to $1.5 to $2.4 trillion in 2023 alone. This money is diverted from patient care to fund administrative overhead.
A Solution: Return to the Law
The original Medicaid law includes Section 1801, which explicitly states that federal officers or employees shall not control the practice of medicine, the provision of services, or the operations of health institutions.
To untangle Medicaid, Washington should adhere to this principle. Beyond providing funding, the federal government should have no role in state Medicaid programs. Eliminating federal oversight would allow states to craft solutions tailored to their needs:
- State Flexibility: States like California could extend benefits to undocumented residents, while states like Texas could choose not to. Both would be operating within the law.
- Work Requirements: States like Oklahoma could implement work requirements for able-bodied enrollees, while others like Illinois could opt out.
- Abortion Decisions: The Supreme Court’s overturning of Roe v. Wade returned abortion decisions to the states. States should similarly control Medicaid policies regarding abortion.
- Innovative Programs: States like Texas could create their own regulatory bodies, such as a Texas Drug Agency (TDA), to oversee medical safety nets independently of federal agencies like the FDA.
Block Grants for Medicaid Funding
Medicaid funding should transition to block grants, with a fixed amount allocated to each state. For example, if California chooses to offer extensive benefits, including housing and food, it should fund these programs within its allocated budget rather than relying on additional federal taxpayer dollars.
The Benefits of Reform
Untangling Medicaid by adhering to Section 1801 would not only simplify the system but could save taxpayers trillions of dollars. States would regain control, tailoring their programs to meet the needs of their residents without federal interference.
Reform is essential, and we hope leaders like RFK Jr., Elon Musk, or Vivek Ramaswamy are paying attention.
