Democrats bemoaning the loss of Medicaid coverage are glossing over a critical fact: States could fund the program themselves if they wanted to. The truth is, Medicaid is not nearly as popular as the taxes needed to keep it afloat.
There is a lot to complain about Trump’s One Big Beautiful Bill (BBB), signed into law last week. For example, it will add trillions to the deficit while allocating billions to be used for deporting hard-working immigrants and even American citizens. Yet Democrats are denouncing it not for its lack of fiscal responsibility, but rather for one of its only positive provisions: its reforms to Medicaid.
Original versions of the bill included various reforms to Medicaid, like work requirements for some able-bodied adults and provisions limiting funds for undocumented immigrants and gender transition procedures. To this, Democrats responded with instant outrage: “Medicaid is a lifeline for millions of kids, seniors, veterans, and people with disabilities in our states and nationwide. Republicans’ proposed cuts would be disastrous.”
The final version of the bill eliminated some of the more thorny cost-saving provisions while keeping the work requirements in place. Yet Democrats are still dissatisfied with the bill, with California Gov. Newsom claiming that “the President and his MAGA enablers are ripping care from cancer patients, meals from children, and money from working families.”
You can tell this is nothing more than political posturing because there are no cuts to Medicaid to begin with. The OBBB only reduces the rate of growth of Medicaid spending, but the overall cost of the program to taxpayers will continue to increase. Cutting means getting rid of something, not reducing the rate at which you add stuff.
Maybe we should not be too hard on the semantics. After all, Americans have very little experience with Medicaid cuts. Throughout its 60-year history, the only time Medicaid spending was truly cut was in 2006, by a mere 0.25%. This should come as no surprise since Medicaid promotes excessive spending by design.
Medicaid is structured in such a way that for every $1 that states spend on Medicaid, the Federal government matches it by up to $9. This design allows state politicians to grant their constituents $10 in political goodies (Medicaid) while only incurring $1 of political cost (higher taxes). Where does the rest of that money come from? Federal taxes and debt.
Now that Washington is cutting back its match rate, this windfall of benefits without costs to states will slow down. States must choose between filling the funding gap themselves (by raising taxes) or reducing coverage. State officials (many of whom will be facing reelection in the next few years) would rather do neither and keep this party going.
Hellbound and Down 