Medicaid is a joint federal-state program that funds medical services and long-term care for people with moderate incomes. Medicaid spending is one of the largest and fastest-growing items in the federal budget, at almost $400 billion a year.

State governments administer Medicaid, but most of the funding comes from the federal government. The current funding structure — based on federal matching grants — encourages expansion and provides little incentive to control costs. At the same time, the top-down regulatory structure of Medicaid distorts health care markets.

The 2010 Affordable Care Act (ACA) increased Medicaid spending and did not fix the program's structural flaws. The ACA expanded eligibility, added to the health services covered, and increased the federal share of program costs. The federal costs of the ACA Medicaid expansion are more than $70 billion a year and rising.¹

Policymakers should reverse course and restructure Medicaid to reduce costs. The program should be turned into a block grant, with the federal government providing a fixed amount of aid to each state. That was the successful approach taken for federal welfare reform in 1996. Fixed grants would encourage states to restrain Medicaid spending, combat fraud and abuse, and pursue cost-effective health care solutions.

With federal block grants, states may choose to transform their Medicaid programs into voucher-based systems. That reform would provide low-income individuals with fixed payments to buy health coverage in private markets, thus encouraging competition and likely providing higher-quality care at lower cost.

Federal deficits are rising, and health care spending is a major reason why. Reforming Medicaid with a block grant structure would allow federal policymakers to control spending while encouraging health care innovations in the states.

Rapid Growth

Congress enacted Medicaid in 1965 to provide medical aid to people with low incomes. The law expanded on the 1960 Kerr-Mills Act, which had provided the states with grants for low-income health care. Since the passage of Medicaid, federal and state legislation has expanded the program many times to cover more services and more people with higher incomes.

Medicaid provides comprehensive medical coverage to beneficiaries. It covers inpatient hospital stays, visits to doctors' offices, and prescription drugs. It covers items not usually included in private insurance plans, such as nursing home care. Federal rules require that states provide minimum levels of Medicaid coverage, but the states are free to expand benefits further, receiving a federal matching grant when they do so.

Medicaid costs have soared. Spending jumped from $118 billion in 2000, to $273 billion in 2010, to $383 billion in 2018.² Even before the ACA passed in 2010, spending was growing rapidly. The law has boosted Medicaid spending by $70 billion a year, and payments continue to rise. ³ As a share of gross domestic product, federal Medicaid spending has almost tripled, increasing from 0.7 percent in 1990 to 1.9 percent today.⁴

One reason that Medicaid's costs have grown so rapidly is that health services are provided free with little in the way of copayments or deductibles. Recipients can also receive free transportation to their health care appointments. The program's generous benefits — with few out-of-pocket costs — have spurred an overuse of services.

Another cause of Medicaid's rapid growth is that policymakers have expanded eligibility and benefits numerous times. Medicaid enrollment jumped from 23 million in 1990, to 35 million in 2000, to 72 million by 2016.⁵ As a share of the U.S. population, enrollment grew from 9 percent in 1990 to 24 percent by 2016. Even though it is widely known that Medicaid is fiscally unsustainable, federal and state policymakers have continued to expand enrollment and benefits.

The costs of Medicaid expansions have often exceeded what legislators promised. For example, Congress added a hospitals subsidy to Medicaid in 1987 to aid facilities that served large numbers of uninsured patients. When enacted, it was supposed to cost less than $1 billion annually by 1992, but it ended up costing a stunning $17 billion that year.⁶

Another pattern evident in Medicaid — and in other federal subsidy programs — is that expansions spawn further expansions down the road. In 1997, Congress built on Medicaid by creating the Children's Health Insurance Program (CHIP), which provides aid to the states for people who have higher incomes than those on Medicaid. Once established, policymakers have expanded CHIP over time.

In addition to health care services, Medicaid covers long-term nursing home and home-based care for the elderly. Long-term care accounts for more than 20 percent of total Medicaid spending.⁷ Remarkably, Medicaid finances half of all long-term care and related services in the nation.⁸ Another thing to note is that "almost two-thirds of all Medicaid spending is for the elderly and persons with disabilities, who [together] make up just one-quarter of all Medicaid enrollees."⁹

The ACA increased Medicaid benefits, expanded services that states are required to cover, and expanded eligibility for the program. Previously, states were required to cover pregnant women and children under the age of 6 who had incomes below 133 percent of the official poverty level, and also children between the ages of 6 and 18 who were below 100 percent of the poverty level. Adults with no children were generally excluded from Medicaid coverage unless disabled.

For states that opt into the Medicaid expansion, the ACA extended eligibility to all people under age 65 with incomes below 133 percent of the poverty level, including childless adults.¹⁰ The great majority of Medicaid expansion costs are being borne by federal taxpayers, not state taxpayers. The law made the program more of a national program with more federal funding, which was the wrong direction to go in.

A 2012 Supreme Court ruling determined that the ACA expansion of Medicaid is a voluntary choice for state governments. So far, 31 states have taken the federal money and expanded the program, while 19 have not.¹¹ The ACA expansion has added at least 13 million people to the program.¹²

The ACA is a budget-buster. By increasing benefits and further federalizing Medicaid, the law threw gasoline on the fiscal fire of runaway health care spending. Congress should reverse course, repeal the ACA, and downsize Medicaid.

Incentives to Expand

As the federal government has expanded Medicaid over the decades, state governments have had incentives to expand the program as well. Since Medicaid is an open-ended federal matching grant, the states receive additional federal cash when they expand eligibility or covered services. The states have substantial flexibility to expand their programs beyond federally required minimum levels.

Each expansion draws more federal funding to a state on the basis of a matching formula called the federal medical assistance percentage (FMAP). For every dollar of additional spending on the program, the federal government kicks in 50 to 75 percent of the costs, with higher-income states receiving a lower federal match and lower-income states receiving a higher federal match.¹³

Overall, the federal government pays about 60 percent of program costs, while states pay 40 percent.¹⁴ That means states can proactively increase spending on their programs and mail a bill for 60 percent of the costs to Washington, on average. The federal government is currently paying more than 90 percent of the costs added by the ACA.¹⁵

Medicaid's federal matching grants create an incentive for states to expand their programs beyond reasonable levels. Federal grants provide state policymakers with "free" money to bestow on their constituents, and that biases them to spend added state dollars on health care rather than on other state priorities such as education or transportation.

Budget expert James Capretta is right that "Medicaid's current federal-state design also undermines political accountability. Neither the federal government nor the states are fully in charge. As a result, each side has tended to blame the other for the program's shortcomings, and neither believes it has sufficient power to unilaterally impose effective reforms."¹⁶

With current federal matching, the states have little political incentive to reduce Medicaid waste because they would need to save two dollars or more in costs to save state taxpayers one dollar. Indeed, states have a strong incentive to abuse the program by trying to inflate the matching dollars they receive from Washington. The states, for example, have tried to push other state spending under the Medicaid umbrella to receive more federal matching money.¹⁷

States have created numerous accounting schemes to maximize federal aid.¹⁸ One scheme involves the states overpaying health care facilities run by local governments to artificially boost federal aid, while another involves the states fiddling with the structure of disproportionate share hospital payments.¹⁹

Another aid-boosting method — used by virtually all the states — is to impose taxes on health providers and then channel that revenue back to the providers.²⁰ The Government Accountability Office (GAO) provides an example of how that method works: "In Illinois, a $220 million payment increase for nursing facilities funded by a tax on nursing facilities resulted in an estimated $110 million increase in federal matching funds and no increase in state general funds, and a net payment increase to the facilities, after paying the taxes, of $105 million."²¹

Such mechanisms are a nontransparent and paperwork-heavy method of financing health care. The Washington Post called them a "swindle."²² They should be repealed.

In sum, the intergovernmental nature of Medicaid and the matching aid structure discourage cost-effective health care choices by the states.

Wide Variations in Spending

Federal Medicaid spending varies widely by state. Federal spending per capita is three times larger in the most subsidized states, such as New York, than in the least subsidized states, such as Utah.²³ This discrepancy is partly a result of differing enrollment levels, but it also stems from wide variations in per-enrollee spending between the states.²⁴

If state health systems were independent and not tied to federal funding, such differences would reflect a diversity of policy choices made by people and policymakers within each state. But the current structure of federal matching aid has helped create an unequal distribution of spending across the states.

Medicaid benefits are aimed at low-income populations, but wealthier states tend to receive relatively more federal aid. The aid formula is based on state per capita income, so poorer states receive a higher federal match. However, the match has encouraged wealthier states to expand Medicaid more than poorer states have, so those wealthier states end up getting relatively more dollars from Washington.²⁵

These effects are evident in Medicaid spending per person below the poverty line. In 2016, federal Medicaid spending per poor person in the five poorest states averaged $8,661, whereas spending per poor person in the five wealthiest states averaged $13,594.²⁶ The same pattern was also evident before the ACA.²⁷

Economists Thomas Grannemann and Mark Pauly said the program "directs a disproportionate share of federal dollars to a small number of high-benefit states, many of which are . . . higher-income states," and thus the distribution of Medicaid grants is "poorly calibrated to support benefits in lower-income states."²⁸

Even if it were a good idea for the federal government to redistribute income from rich states to poor states, the data show that Medicaid does not do that.

Economic Distortions

Medicaid should be reformed not just for fiscal reasons, but also to reduce distortions in health care. Under fee-for-service Medicaid, state governments reimburse health care providers on the basis of a complex system of prices, set bureaucratically, for thousands of medical products and services. These price controls create costly distortions. For example, "many states underpay physicians and overpay hospitals, encouraging hospital-based treatment instead of less expensive care in doctors' offices."²⁹

Medicaid pays only about 60 percent of the amounts that private insurers pay for hospital and physician services.³⁰ One distortion this creates is that health providers try to shift some of the costs of Medicaid patients onto private insurance companies.³¹

A large share of providers will not take Medicaid patients because of the low reimbursement rates, a condition that limits access to health care. About one-third of doctors are not taking new Medicaid patients, compared with half of that share who are not taking new patients with private insurance.³² Health economist Joseph Antos notes that the low doctor participation rates in Medicaid are "the direct result of low payment rates and overly burdensome administrative practices that delay payment and add to the headaches of dealing with the state bureaucracy."³³

Over time, states have been moving Medicaid recipients into managed care plans, under which states pay managed care firms a fee for each person enrolled, and the firms then pay health providers for the services delivered. About 80 percent of Medicaid recipients are now in managed care plans.³⁴

While managed care reduces some distortions evident in fee-for-service care, it creates other problems. One problem is that managed care creates incentives for companies to maximize the number of enrollees in plans, which pushes up taxpayer costs.³⁵ There is an ongoing debate about whether managed care reduces overall Medicaid costs, and there are disagreements about the effects on the quality of care.³⁶

As a means-tested welfare program, Medicaid undercuts work incentives. Since the program aids people below certain income levels, it discourages some people from increasing their earnings for fear of losing their health coverage. And, in general, welfare programs discourage self-help and personal savings, and they promote dependence on government.

Perhaps the most harmful effect of Medicaid is that it "crowds out" private health care options. There may be innovative ways that charitable groups would provide health care to the poor, and there may be ways that insurance firms would innovate with lower-cost coverage options. But the existence of Medicaid and costly health care regulations stifles such entrepreneurial efforts.

In the past, "individual physicians treated a certain amount of uninsured patients in their practice without charge or for a reduced fee as part of the medical profession's ethical obligation to care for the poor."³⁷ But as Medicaid and CHIP have grown over the decades, such aid and private insurance has been squeezed out.³⁸ CHIP subsidies are likely to produce more crowding out than Medicaid because CHIP targets recipients with higher incomes.³⁹

One mechanism that exacerbates crowding out is that "the more federal and state governments expand Medicaid, the more expensive private medical care and insurance become."⁴⁰ For example, economists have found that Medicaid's system for setting drug prices increases drug prices for private payers.⁴¹

Empirical estimates on the size of crowding out vary. A 2011 study by Steven Pizer and coauthors found an 82 percent crowd-out for Medicaid expansions for working adults.⁴² According to a 2008 study by Jonathan Gruber and Kosali Simon: "Crowd-out is significant. Our central estimates suggest that crowd-out is on the order of 60%: private insurance coverage is reduced by 60% as much as public insurance coverage rises when there are public eligibility expansions."⁴³ Other estimates are substantially lower.⁴⁴ But policymakers should understand that, to some extent, they are replacing private health care solutions as they have expanded government programs.

Fraud and Abuse

Medicaid has a huge problem with fraud and abuse. The program distributes hundreds of billions of dollars in payments every year to a huge number of health care providers. The GAO estimates that $37 billion of those payments in 2017 were improper or erroneous, which was about 10 percent of federal spending on the program.⁴⁵

That GAO estimate of waste may be optimistic. Harvard University's Malcolm Sparrow, an expert on health care fraud, estimated that improper payments in federal health care programs could be as high as 20 percent.⁴⁶ The inspector general of the Department of Health and Human Services said, "Although it is not possible to measure precisely the extent of fraud in Medicare and Medicaid, everywhere it looks the Office of Inspector General continues to find fraud against these programs."⁴⁷

Here are some recent examples of fraud and abuse uncovered by investigators:

• The owner of a Maryland company that provided x-rays and other services was sentenced to 10 years in prison for defrauding Medicaid and Medicare out of $6 million.⁴⁸ For years, the owner had been submitting claims for fake exams.
• A New Mexico hospital paid a $12 million settlement for making illegal donations to county governments to fund the state's share of Medicaid payments, allowing the hospital to receive larger amounts of funding.⁴⁹
• The owner of a Brooklyn health clinic chain was sentenced to five years in prison for a $70 million Medicare and Medicaid scam.⁵⁰ Clinic employees went to soup kitchens and welfare offices to recruit poor people covered by the health programs to undergo unnecessary tests in return for cash payments.
• The CEO of a company that owned nursing homes in Missouri, Kentucky, and Tennessee was sentenced to three years in prison for stealing more than $600,000 of Medicaid funds. The CEO spent wildly at country clubs, casinos, and strip clubs, while his nursing home residents did not receive sufficient food or medicine.⁵¹
• Numerous residents of a luxury condo in Brighton Beach, New York, were charged with Medicaid fraud.⁵² Condos in the complex are worth up to $1.6 million, yet many residents had apparently learned from each other how to scam health benefits.

New York has had a particularly bad abuse problem. The former chief investigator of the state's Medicaid office believes that about 10 percent of the state's Medicaid budget is consumed by pure fraud, while another 20 percent or so is wasted by other dubious spending.⁵³

In an investigation, the New York Times found that the state's Medicaid fraud problem has "become so huge, so complex, and so lightly policed that it is easily exploited . . . the program has been misspending billions of dollars annually because of fraud, waste, and profiteering."⁵⁴ Here is some of the waste found by the Times:

• A dentist stole more than $1 million from New York's Medicaid program by making claims for fictitious patients and procedures. In one instance, she made claims for 991 separate procedures supposedly performed in a single day.
• Medicaid pays for transportation for handicapped persons, but investigators have found that many people using the service were not handicapped, and that many transportation firms rigged the system to earn unjustified profits.
• New York schools charged Medicaid more than $1 billion for unneeded or unprovided special education activities as a way to milk the state for grants.
• Criminal gangs diverted Medicaid-covered muscle-building drugs that were intended for AIDS patients and sold them to bodybuilders.

Schemes to bilk Medicaid are routinely uncovered across the nation. Federal investigators play "whack-a-mole" with criminals — when they crack down on health scams in one city, the scams move elsewhere.⁵⁵ Armando Gonzalez opened psychiatric clinics in Miami and stole $28 million from Medicaid and Medicare.⁵⁶ When authorities started investigating his clinics, Gonzalez closed them and then opened a new scam clinic in North Carolina that operated for years before he was finally arrested.

One type of fraud is double billing. In one case, the University of Medicine and Dentistry of New Jersey double billed Medicaid repeatedly over the years by directly submitting claims for outpatient physician services at the same time that doctors working in the hospital's outpatient centers were submitting their own claims for the same procedures.⁵⁷

There is huge abuse in Medicaid's long-term care program. The program has eligibility rules based on one's income and assets. But nursing homes are expensive, so the program creates an incentive for middle- and higher-income families to try to qualify. An industry of consultants helps seniors hide their income and assets to gain eligibility.⁵⁸ This sort of abuse may cost taxpayers about one-fifth of the total cost of Medicaid's long-term care program.⁵⁹

Medicaid has high levels of fraud partly because of the federal structure. State officials do not have strong incentives to vigorously tackle fraud and abuse because the federal government pays most of the program's costs. For every two or more dollars of fraud that a state can cut, the state budget saves only one dollar. The solution is to end the matching nature of federal aid and provide states with a fixed block grant.

Reforming with Block Grants

A good way to reform Medicaid would be to turn it into a block grant. The federal government would give each state a fixed amount of aid each year, which would allow federal legislators to control spending. The grant amount could be reduced over time, but the states would receive flexibility to design more cost-effective health plans.

A less effective type of a reformed grant would be to provide each state a per-enrollee grant, which would encourage states to control per-enrollee costs but not induce them to limit enrollment. Such a reform would be a step forward, but it would not solve the crowd-out problem of government coverage drawing in people who might otherwise have private coverage.

Under the current Medicaid system, the more states spend, the more they gain at the expense of federal taxpayers. But under a block grant, states would have an incentive to spend funds more efficiently and to pursue innovations unencumbered by federal regulations. Block grants were the successful approach taken for welfare reform in 1996, which converted the open-ended funding of Aid to Families with Dependent Children to fixed grants under Temporary Assistance for Needy Families.

Reformers have long pursued such reforms for Medicaid. In 1981, President Ronald Reagan proposed turning the program into a block grant and capping annual growth at 5 percent.⁶⁰ In 1995, congressional Republicans proposed block grants with capped annual growth at 4 percent.⁶¹ President Bill Clinton vetoed that bill, but he proposed per capita caps for the program, an idea that had substantial Democratic support at the time.⁶²

President George W. Bush proposed Medicaid block grants.⁶³ His plan would have allowed states to receive their aid in the usual structure or in the form of a block grant with higher initial funding levels. The administration did not push the plan very hard, and it was dropped.

In 2011, the House Budget Committee called for "converting the federal share of Medicaid spending into a block grant tailored to meet each state's needs, indexed for inflation and population growth. . . . States will no longer be shackled by federally determined program requirements and enrollment criteria. Instead, they will have the freedom and flexibility to tailor a Medicaid program that fits the needs of their unique populations."⁶⁴

In 2017, the House passed the American Health Care Act, which would have converted federal funding to state-specific per-enrollee grants for each of the various Medicaid populations or, at the choice of each state, a block grant for certain populations.⁶⁵ The bill did not pass the Senate. President Donald Trump's federal budgets in 2018 and 2019 proposed Medicaid block grant reforms.

Without reforms, federal Medicaid spending is expected to soar from $383 billion in 2018 to $655 billion by 2028.⁶⁶ Repealing the ACA expansion of Medicaid would save federal taxpayers more than $800 billion over 10 years.⁶⁷ Block granting the rest of the Medicaid program, and capping annual growth at 2 percent, would save another $800 billion or more over 10 years.⁶⁸

Recently, the Trump administration has pursued Medicaid reforms by issuing waivers to states allowing them to adopt cost-cutting changes. A number of states are adopting work requirements for nondisabled Medicaid recipients. That makes sense because the ACA expanded Medicaid to cover all individuals below an income cap, including nondisabled people who generally should be working.⁶⁹

Under the current Medicaid system, "even relatively modest changes in program operations must be approved by the Centers for Medicare and Medicaid in a process that can be time-consuming and uncertain."⁷⁰ But with block grants and fewer regulations, the states would have the flexibility to discover ways of delivering better services at lower costs.

Reforming Medicaid through federal block grants would help move health care decisionmaking from Washington to the states and the people. The states would be able to explore consumer-driven health care systems based on individual vouchers. That is, they could move away from today's defined benefit coverage toward a defined contribution approach.

Under this approach, states would provide individuals with fixed annual payments, which those individuals would use to purchase health care options of their choice. People could, for example, purchase high-deductible insurance plans and deposit their remaining voucher amounts in tax-free health savings accounts (HSAs).⁷¹ The vouchers would be risk adjusted, meaning that individuals with higher costs would receive additional aid.

Under a consumer-directed structure, Medicaid's regulatory apparatus could be slashed. The government would not have to bureaucratically set prices for doctor and hospital services. Fraud and abuse would be reduced because the government would not be making millions of provider payments. The states would have controllable costs because they would set the voucher amounts.

Meanwhile, low-income individuals would be better integrated into the private health care system, and they would likely receive broader access to health care services. The quality of care would likely improve compared with the much-criticized quality of today's Medicaid.⁷²

Health policy expert James Capretta said that today, "the fundamental problem in Medicaid is that neither the federal government nor the states are fully in charge."⁷³ The solution is to put the states fully in charge and phase out federal funding completely over time. Federal funding ultimately comes from taxpayers who live in the 50 states, so we should let the states and the people keep their money and fund their own health care systems.

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¹ Congressional Budget Office, "Federal Subsidies for Health Insurance Coverage for People under Age 65: 2017 to 2027," September 2017.

² Congressional Budget Office, "The Budget and Economic Outlook: 2018 to 2028," April 2018.

³ Congressional Budget Office, "Federal Subsidies for Health Insurance Coverage for People under Age 65: 2017 to 2027," September 2017.

⁴ Congressional Budget Office, "The Budget and Economic Outlook: 2018 to 2028," April 2018.

⁵ MACPAC, "Medicaid Enrollment and Total Spending Levels and Annual Growth," www.macpac.gov.

⁶ Joint Economic Committee, Senator Sam Brownback, Ranking Republican Member, "Are Health Care Reform Cost Estimates Reliable?," July 1, 2009.

⁷ Congressional Budget Office, "Detail of Spending and Enrollment for Medicaid for CBO's January 2017 Baseline," January 2017.

⁸ Erica L. Reaves and MaryBeth Musumeci, "Medicaid and Long-Term Services and Supports: A Primer," Kaiser Family Foundation, December 15, 2015.

⁹ Robin Rudowitz, "Medicaid Financing: The Basics," Kaiser Family Foundation, December 2016.

¹⁰ Kaiser Family Foundation, "Medicaid Pocket Primer," June 9, 2017.

¹¹ Kaiser Family Foundation, "Medicaid Pocket Primer," June 9, 2017.

¹² Congressional Budget Office, "Federal Subsidies for Health Insurance Coverage for People under Age 65: 2017 to 2027," September 2017.

¹³ Robin Rudowitz, "Medicaid Financing: The Basics," Kaiser Family Foundation, December 2016.

¹⁴ Robin Rudowitz, "Medicaid Financing: The Basics," Kaiser Family Foundation, December 2016.

¹⁵ Robin Rudowitz, "Medicaid Financing: The Basics," Kaiser Family Foundation, December 2016. The federal share of the ACA expansion is falling to 90 percent by 2020.

¹⁶ James C. Capretta, "Medicaid," American Enterprise Institute, February 2017.

¹⁷ James C. Capretta, "Medicaid," American Enterprise Institute, February 2017.

¹⁸ Red Jahncke, "Why Tax Hospitals? It's a Medicaid Shell Game," op-ed, Wall Street Journal, December 29, 2017.

¹⁹ Joseph Antos, "The Structure of Medicaid," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 20.

²⁰ Robin Rudowitz, "Medicaid Financing: The Basics," Kaiser Family Foundation, December 2016.

²¹ Government Accountability Office, "Medicaid Financing," GAO-14-627, July 29, 2014.

²² Washington Post, "Medicaid Money Laundering," editorial, May 19, 2008. And see Government Accountability Office, "Medicaid Financing: Long-Standing Concerns about Inappropriate State Arrangements Support Need for Improved Federal Oversight," GAO-08-650T, April 3, 2008.

²³ Author's calculations based on 2016 data. By per capita, I mean based on entire state populations.

²⁴ Kaiser Family Foundation, "Data Note: Variation in Per Enrollee Medicaid Spending," June 9, 2017.

²⁵ Joseph Antos, "The Structure of Medicaid," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 9.

²⁶ Author's calculation using data from Kaiser Family Foundation, "Federal and State Share of Medicaid Spending," 2016, as well as poverty data from the Census Bureau, Current Population Survey, and income data from the Bureau of Economic Analysis.

²⁷ Robert B. Helms, "Medicaid: The Forgotten Issue in Health Reform," American Enterprise Institute, November 2009.

²⁸ Thomas W. Grannemann and Mark V. Pauly, "Equal-Burden-For-Equal-Benefit Medicaid," American Enterprise Institute, July 9, 2009.

²⁹ John Goodman, Michael Bond, Devon Herrick, and Pamela Villarreal, "Opportunities for State Medicaid Reform," National Center for Policy Analysis, September 2006.

³⁰ James C. Capretta, "Medicaid," American Enterprise Institute, February 2017. See also Joseph Antos, "The Structure of Medicaid," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 10.

³¹ Thomas P. Miller, "How to Achieve Sustainable Medicaid Reform," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 148.

³² Julia Paradise, "Data Note: A Large Majority of Physicians Participate in Medicaid," Kaiser Family Foundation, May 10, 2017. And see James C. Capretta, "Medicaid," American Enterprise Institute, February 2017.

³³ Joseph Antos, "The Structure of Medicaid," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 21.

³⁴ Kaiser Family Foundation, "Total Medicaid Managed Care Enrollment," 2015. Available under "State Health Facts."

³⁵ Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

³⁶ Darcy Nikol Bryan, "A Physician's Perspective," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 111. And see Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

³⁷ Darcy Nikol Bryan, "A Physician's Perspective," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 112.

³⁸ Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

³⁹ Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

⁴⁰ Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017.

⁴¹ Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

⁴² Steven D. Pizer, Austin B. Frakt, and Lisa I. Iezzoni, "The Effect of Health Reform on Public and Private Insurance in the Long Run," February 17, 2011. Available at https://ssrn.com/abstract=1782210.

⁴³ Jonathan Gruber and Kosali Simon, "Crowd-Out 10 Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?," Journal of Health Economics 27 (2008): 201–207.

⁴⁴ Gruber and Simon survey the literature. Jonathan Gruber and Kosali Simon, "Crowd-Out 10 Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?," Journal of Health Economics 27 (2008): 201–207.

⁴⁵ Government Accountability Office, "Medicaid: Further Action Needed to Expedite Use of National Data for Program Oversight," GAO-18-70, December 2017. And see Government Accountability Office, "CMS Has Taken Steps, but Further Efforts Are Needed to Control Improper Payments," GAO-17-386T, January 41, 2017.

⁴⁶ Malcolm Sparrow, "Criminal Prosecution as a Deterrent to Health Care Fraud," testimony to the Senate Committee on the Judiciary, Subcommittee on Crime and Drugs, May 20, 2009.

⁴⁷ Daniel R. Levinson, Inspector General, Department of Health and Human Services, "Combating Fraud, Waste, and Abuse in Medicare and Medicaid," testimony before the Senate Special Committee on Aging, May 6, 2009.

⁴⁸ Sarah Gantz, "Baltimore Medical Provider Sentenced to 10 Years over X-ray Scheme," Baltimore Sun, June 15, 2016.

⁴⁹ T. S. Last, "Christus St. Vincent, Partner Will Pay $12.2M to Settle Medicaid Claims Suit," Albuquerque Journal, September 1, 2017.

⁵⁰ Department of Justice, U.S. Attorney's Office, Southern District of New York, "Clinic Owner Sentenced in Manhattan Federal Court to Five Years in Prison in $70 Million Scheme to Defraud Medicare and Medicaid," February 27, 2017.

⁵¹ Jeremy Kohler, "Festus Nursing Home Owner Who Spent Medicaid Funds on Strippers Gets 41 Months in Prison," St. Louis Post-Dispatch, October 6, 2017.

⁵² Isabel Vincent, "Six Residents at Luxury Brighton Beach Condo Complex Busted for Medicaid Fraud," New York Post, August 11, 2013.

⁵³ Estimate cited in Clifford J. Levy and Michael Luo, "New York Medicaid Fraud May Reach into Billions," New York Times, July 18, 2005.

⁵⁴ Clifford J. Levy and Michael Luo, "New York Medicaid Fraud May Reach into Billions," New York Times, July 18, 2005.

⁵⁵ Carrie Johnson, "Medical Fraud a Growing Problem," Washington Post, June 13, 2008.

⁵⁶ U.S. Department of Justice, Office of Public Affairs, "Medical Director and Three Therapists Sentenced for Their Roles in $63 Million Miami Health Care Fraud Scheme," November 6, 2015.

⁵⁷ Department of Justice, Office of Public Affairs, "New Jersey University Hospital to Pay Additional $2 Million to Resolve Fraud Claims That Facility Double Billed Medicaid," June 9, 2009.

⁵⁸ Stephen A. Moses, "Aging America's Achilles' Heel: Medicaid Long-Term Care," Cato Institute Policy Analysis no. 549, September 1, 2005. See also Ron Lieber, "The Ethics of Adjusting Your Assets to Qualify for Medicaid," New York Times, July 21, 2017.

⁵⁹ Mark Warshawsky, "Millionaires on Medicaid," Wall Street Journal, January 6, 2014. And see Michelle Higgins, "Getting Poor on Purpose," Wall Street Journal, February 25, 2003. The story notes that up to 22 percent of Medicaid's $47 billion in annual benefits go illegally to well-heeled seniors. 

⁶⁰ Congressional Quarterly Inc., Congressional Quarterly Almanac 1981, vol. XXXVII, 1982, p. 477.

⁶¹ Congressional Quarterly Inc., Congressional Quarterly Almanac 1995, vol. LI, 1996, pp. 2–22.

⁶² James C. Capretta, "Medicaid," American Enterprise Institute, February 2017.

⁶³ Budget of the U.S. Government, Fiscal Year 2004 (Washington: Government Printing Office, 2003), p. 126.

⁶⁴ House Budget Committee, "Path to Prosperity: Restoring America's Promise," Fiscal Year 2012 Budget Resolution, 2011.

⁶⁵ Kaiser Family Foundation, "Summary of the American Health Care Act," May 2017.

⁶⁶ Congressional Budget Office, "The Budget and Economic Outlook: 2018 to 2028," April 2018.

⁶⁷ Estimated based on Congressional Budget Office, "Federal Subsidies for Health Insurance Coverage for People under Age 65," September 2017. Updated based on more recent CBO data.

⁶⁸ Estimated based on Congressional Budget Office, "The Budget and Economic Outlook: 2018 to 2028," April 2018.

⁶⁹ Michael R. Strain, "A Work Requirement for Medicaid Isn't Cruel," Bloomberg.com, January 17, 2018.

⁷⁰ Joseph Antos, "The Structure of Medicaid," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 10.

⁷¹ HSAs are discussed in Michael F. Cannon, "The Tax Treatment of Health Care," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

⁷² Robert F. Graboyes, "Medicaid and Health," in The Economics of Medicaid, ed. Jason J. Fichtner, ed. (Arlington, Virginia: Mercatus Center, 2014), p. 178; Michael F. Cannon, "Medicaid and the State Children's Health Insurance Program," Cato Handbook for Policymakers, 8th ed. (Washington: Cato Institute, 2017).

⁷³ James Capretta, "Reforming Medicaid," in The Economics of Medicaid, ed. Jason J. Fichtner (Arlington, VA: Mercatus Center, 2014), p. 143.