Issue: Medical Assistance — Medicaid

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Issue Summary

Medicaid is the primary federal means-tested program financing medical care for low-income elderly individuals, families, children, pregnant women, and people with disabilities. In FY 2011, Medicaid financed services to more than 69 million people1 at a combined federal and state cost of $434 billion.2 The $274 billion federal share3 is predicted to grow to $423 billion by FY2017.4 Medicaid, not Medicare, finances most long-term (nursing home) care for America's elderly.

Each state designs and administers its own Medicaid program, but must comply with federal rules which set minimum eligibility standards; mandate coverage for specific health conditions; and prohibit requiring co-payments from beneficiaries as well as prohibiting the use of federal funds to pay private insurance premiums for beneficiaries without a federal waiver. Like the old Aid for Families with Dependent Children (AFDC) cash assistance program, Medicaid spending is open-ended. The federal government reimburses states from 50% to 80% of the amount each spends on their Medicaid program5 (Federal spending is based on state per capita income with poorer states reimbursed at a higher rate.)6

The so-called Stimulus Bill (the American Recovery and Reinvestment Act of 2009) increased federal Medicaid spending by almost $34 billion that year (14 percent) and by a total of almost $90 billion from 2009 to 2013 — primarily by increasing federal reimbursement rates to the states.7

If ObamaCare (the Patient Protection and Affordable Care Act — PPACA) remains in effect, in FY 2014 states will be required to extend Medicaid coverage to able-bodied, childless adults as well as families with much higher incomes than those who currently qualify for benefits.8 This would add an additional 16 million non-elderly individuals to the Medicaid rolls — a nearly 50 percent increase in such beneficiaries above the 35 million non-elderly recipients that had already been expected to be served under previous law.9 In addition, if ObamaCare becomes fully operative, the federal government will force states to enlarge their Medicaid rolls, with the federal government covering 100% of the cost of any new enrollees during the new law's initial three-year implementation period beginning in FY2014, and the states picking up their normal share of the costs going forward after the three-year implementation period.10

What Would Reagan Do?

Ronald Reagan understood that resources — be they federal, state, or one's own — are, by definition limited. And, he believed that it was a fiscal and moral imperative that limited government resources be targeted to those individuals most in need.

President-elect Reagan, as part of the transition process from the Carter administration, approved the following recommendation regarding the federal Medicaid program for the poor:

"The federal Medicaid regulations and statutory mandates, other than cost control mandates, be repealed."

Issue History

Medicaid was enacted in 1965 to finance medical care for welfare recipients. Since then, the number of individuals made eligible for the program under the law has frequently been expanded. ObamaCare, however, represents the most significant growth in the Medicaid program since its establishment and includes the single largest eligibility expansion since the program's inception.

ObamaCare's unprecedented expansion of the Medicaid program will threaten the fiscal sustainability of the well-intentioned medical safety net for the needy by shifting and increasing Medicaid costs to cash-strapped states. It requires states to expand Medicaid to certain individuals under age 65 including all childless adults with income up to 138% of the federal poverty level (FPL) — $30,500 for a family of four or $15,000 for a childless adult.11 States may cover — and be reimbursed by the federal government for their costs — pregnant women and infants up to 185 percent of FPL ($41,000 for a family of 4), children with disabilities with family income up to 300 percent of FPL ($66,150 for a family of four), and all non-elderly, non-pregnant individuals including young, able bodied men with modified adjusted gross income above 133 percent of the FPL ($15,000) — which of course means that there is no income limit on those who may be covered even if they are able-bodied adults.12 The new law also prohibits states from making their Medicaid eligibility standards more restrictive than they were on the date ObamaCare was enacted.13

Of the ten largest federal programs that provide benefits for low-income individuals, Medicaid far exceeds the next largest program (Food Stamps/SNAP) — $297 billion to $72 billion in FY2011.


The Carleson Center Welfare Reform Action Fund's (WRAF) sister organization — the 501(c)(3) Carleson Center for Welfare Reform (CCWR) — identified numerous health care related federal programs that, combined with Medicaid, would create a consolidated block grant to the states to deliver medical care for the needy.14 Most of these programs provide formula and project grants to supplement medical services to targeted low-income populations. Others provide cooperative agreements with state and local entities to support demonstration projects and coordination initiatives to enhance and improve delivery of medical services to the poor.

A total of 18 programs comprising the block grant proposal together cost over $290 billion at the federal level in FY2011 — not counting the federal government's administrative costs for the programs.

An informed government policy to protect the nation's safety net should begin by reining in the welfare state through a time-tested approach — cutting spending on those who are NOT really in need. Thirty years ago, Ronald Reagan approved a blueprint to end welfare dependency not just for the benefit of federal and state taxpayers, but for the long-term benefit of welfare recipients themselves. The time was not right then. The time must be right now.

The CCWR report proposes an achievable, common-sense plan — and model legislation to enact it — to end the hopeless bureaucratic overlap and fiscal abuse plaguing our nation's welfare spending; assure that limited taxpayer funding is directed to benefit the truly needy; and permanently reduce the size and influence of the federal welfare bureaucracy. The WRAF is working to urge Congress to approve this and the CCWR report's recommendations to block grant 6 other categories of welfare programs to the states as well. Preliminary versions of the Medicaid and Food Stamp proposals were introduced as HR 4160 and HR 6567 in the 112th Congress; the Medicaid bill was reintroduced in the 113th Congress as HR 567, and the Food Stamp bill as HR 1355.



Program Name



Change from 2008-2011


Medical Assistance Program





Children's Health Insurance Program





State Medicaid Fraud Control Units





Coordinated Services and Access to Research for Women, Infants, Children, and Youth





Projects for Assistance in Transition from Homelessness (PATH)





Public Health Conference Support





Special Projects of National Significance





Area Health Education Centers Point of Service Maintenance and Enhancement Awards





Emergency Medical Services for Children





Cooperative Agreements to States/Territories for the Coordination and Development of Primary Care Offices





Area Health Education Centers Infrastructure Development Awards





State Grants for Protection and Advocacy Services





PPHF 2012 – Applied Leadership for Community Health Improvement





National Forum for State and Territorial Chief Executives





Initiative to Educate State and Territorial Officials about Maintaining and Strengthening Public Health in a Changing Environment





National Organizations of State and Local Officials





State Health Access Program





Medicaid Transformation Grants








  1. CRS Report RL33202, Medicaid: A Primer, by Elicia J. Herz (Washington, DC: Congressional Research Service, July 18, 2012).
  2. CMS, Financial Report: Fiscal Year 2011 (Washington, DC: Centers for Medicare & Medicaid Services, 2011), p. 9.
  3. Ibid, p. 9.
  4. OMB, The President’s Budget: Fiscal Year 2013, Historical Tables, Table 8.5 (Washington, DC: Office of Management and Budget, 2012).
  5. CRS Report RL32950, Medicaid: The Federal Medical Assistance Percentage (FMAP), Table A-1, Regular FMAPs, FY2003-FY2011, by Evelyne P. Baumrucker (Washington, DC: Congressional Research Service, September 24, 2010).
  6. CRS Report R41625, Federal Benefits and Services for People with Low Income: Programs, Policy, and Spending, FY2008-FY2009, by Karen Spar (Washington, DC: Congressional Research Service, January 31, 2011).
  7. CRS Report R40223, American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 11-5); Title V, Medicaid Provisions, by Cliff Binder, Evelyne P. Baumrucker, Elicia J. Herz (Washington, DC: Congressional Research Service, March 17, 2009), p. 3.
  8. CRS Report R41210, Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA: Summary and Timeline coordinated by Julie Stone.
  9. CBO, “Selected CBO Publications Related to Health Care Legislation, 2009–2010,” (Congressional Budget Office, December 2010), p. 11, p. 23.
  10. CRS Report R41210.
  11. Id.
  12. CRS Report RL33202, Medicaid: A Primer, by Elicia J. Herz.
  13. CRS Report R41210, Medicaid and the State Children’s Health Insurance Program (CHIP) Provisions in PPACA: Summary and Timeline coordinated by Julie Stone.
  14. "Securing the Safety Net," a report by The Carleson Center for Welfare Reform (January, 2013).