Sen. Bill Cassidy (R-LA) recently ripped into progressives for opposing Medicaid reform.
“Medicaid is meant to be a state-federal partnership,” Cassidy, who has an M.D., wrote on X. “States are supposed to pay for 40% of the cost. Most states are paying for less than 15%. … People should not be asking what is the federal government doing? They should be asking why aren’t the states doing more.”
Cassidy is right. Congress originally designed Medicaid in 1965 under President Lyndon B. Johnson’s “Great Society” program as a joint federal-state entitlement, with states and the federal government roughly splitting costs. But states have found ways to shift an ever-growing amount of the cost to federal taxpayers. It’s high time Congress restored balance to the program.
In 1966, Medicaid’s first year in existence, the federal government and the states each covered roughly half of the program’s costs. Now, the federal government pays nearly 75% of the total. Between 2008 and 2023, states pushed the entire economic burden of Medicaid growth onto the federal government, according to the Paragon Health Institute.
Thankfully, there are a number of ways the federal government can compel states to pay their rightful share.
First, Congress can end the perverse incentive for states to prioritize able-bodied adults over the truly needy. Medicaid was created to provide health benefits to the destitute, the disabled, pregnant women, and others who cannot take care of themselves. The federal government covers between 50% and 77% of the costs for this “legacy” population.
The Affordable Care Act expanded Medicaid eligibility to able-bodied adults earning up to 138% of the federal poverty line, or $44,367 for a family of four. The federal government covers 90% of expansion enrollees’ costs.
This financing structure creates a perverse incentive for states to favor enrolling healthy, often childless adults over the vulnerable. Congress can end that unfairness by reducing the match for expansion enrollees so it’s equivalent to that for legacy enrollees. Doing so would reduce federal spending by as much as $690 billion over the coming decade, while potentially improving benefits and services for the most vulnerable.
Congress can also ban provider taxes, a money-laundering scheme wherein states levy taxes on healthcare providers and then return the revenue to those providers in the form of higher Medicaid reimbursement rates. The additional state spending attracts federal matching funds, in accordance with Medicaid’s long-standing structure. Ending the provider tax gimmick could save federal taxpayers as much as $175 billion over the next 10 years.
Finally, Congress can focus on ending waste, fraud, and abuse in Medicaid. A new Trump administration rule bans states from using Medicaid to pay for housing, groceries, and other external factors that purportedly affect health. Congress should enshrine that action into law.
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Medicaid wasted more than $1 trillion on improper payments over the past decade, largely on ineligible enrollees. Forcing states to conduct more frequent eligibility audits could deliver savings for federal taxpayers and hold states more accountable for the money they demand.
Spendthrift states such as New York and California shouldn’t have a blank check for Medicaid from the federal government. It’s high time Republicans restored the program to its original purpose of serving the truly needy.
Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It (Encounter 2025). Follow her on X @sallypipes.