The Economic and Social Consequences of Medicaid Expansion: Jonathan Williams on American Radio Journal

As usual in Washington, the road to fiscal ruin is paved with good intentions and taxpayer dollars, and nowhere is this more apparent than in Medicaid—one of the largest and most mismanaged welfare programs in the country—originally created in the 1960s as part of President Lyndon Johnson’s Great Society programs.

Medicaid was intended to provide a social safety net health care to the truly needy: low-income families with children and individuals with disabilities. That was the purpose—and a very reasonable one—if limited in scope. But like most government programs, it didn’t stay limited over time.

The program expanded far beyond its original design. Today, it serves more than 70 million Americans, including a growing number of healthy, working-age adults with no children who were never intended recipients.

This shift didn’t happen by accident. It was a result of deliberate federal policy choices—most recently, the improperly named Affordable Care Act, better known as Obamacare. One of its key provisions was the so-called Medicaid expansion, which opened up the program to non-disabled adults without dependents, so long as their income fell below a certain threshold.

To get the states on board, the federal government sold this as an irresistible deal: it would cover 100% of the cost for the newly eligible population, at least initially. Today, that rate sits at 90%, still far more generous than the federal government pays for traditional enrollees, like children and the disabled.

To put this plainly, Washington is giving states more money to cover people who are able to work than it gives them to cover people who can’t. That’s not just bad policy; it’s upside-down logic.

More troubling is what this means in practice: roughly 30% of Medicaid participants today are in the system due to the Obamacare expansion. Through this major expansion, the federal government has created a powerful disincentive to work. When individuals can receive taxpayer-funded health care without being employed, many will choose not to participate in the workforce altogether.

This is not conjecture. This is basic economics. Incentives matter, and bad incentives produce bad results.

States, for their part, have largely taken the bait. All but 10 states have adopted the expansion, enticed by the promise of the so-called free federal dollars. But we know there’s no such thing as a free lunch. It’s taxpayer money—borrowed, printed, or taxed into existence. It is money we do not have used to support behavior we should not encourage.

See the national debt clock for a fiscal wake-up call. Today, it sits at about $36.8 trillion and counting.

Worse still is the rampant fraud and abuse that characterizes programs the size and complexity of Medicaid. Medicaid is jointly funded by the federal and state governments but administered by the states, often with little oversight. That’s a recipe for waste.

A recent investigation by the Wall Street Journal found that Medicaid paid out more than $4.3 billion over just three years to individuals who are enrolled in multiple states. That’s not a clerical error. That is a systematic failure of basic administrative competence.

Overall, according to the non-partisan Paragon Institute, federal improper payments in Medicaid totaled $1.1 trillion over the past decade. And unbelievably, the Biden administration actually put rules in place to make it more difficult for states to determine proper eligibility of those enrolled in Medicaid.

Thankfully, lawmakers in states today—like Indiana and Idaho—were successful this year in their efforts to require regular eligibility verifications matched against federal databases, work requirements, and other common-sense reforms to their Medicaid systems. States continue to lead on the big-ticket policy reforms America desperately needs.

Medicaid reform at the state or federal level isn’t about denying care to the vulnerable. It is about ensuring the truly needy are not pushed aside by policies that prioritize able-bodied, working-age adults without children.

If Medicaid is to serve its original purpose—providing a safety net for those who cannot help themselves—it must return to that purpose. Congress now has a critical opportunity. That includes implementing common-sense eligibility checks, data sharing between states, and stronger anti-fraud measures to ensure the program isn’t being looted in plain sight.

Public policy should not be judged by its intentions, but by its results. And the results of Medicaid expansion under Obamacare have been dependency, fraud, and fiscal recklessness.

We are told that compassion requires even more government spending. But real compassion means ensuring that help is targeted, effective, and sustainable. A program that subsidizes inactivity while diverting resources from the truly vulnerable is not compassionate—it’s irresponsible.

For more information and ideas from policy reforms in the states and Medicaid reform, you can visit alec.org.