Medicaid is one of the largest and fastest-growing items in the federal budget. State and federal spending on the program totaled $931.7 billion in fiscal year 2024, with federal spending growing by more than 80 percent from FY 2016 to FY 2025. This outpaced Social Security (73 percent), Medicare (71 percent), defense (53 percent), and nearly every other spending category over the same period. Medicaid is also highly vulnerable to financial mismanagement with $37 billion in federal improper payments in FY 2025, though actual figures are likely higher. Is Medicaid’s spending growth a direct result of its matching grant structure? While states administer the program, the federal government matches state spending with $1 to $9 in taxpayer funding. This arrangement encourages states to overspend, shift costs to federal taxpayers with financing gimmicks, and tolerate fraud and improper payments.

Our panel will examine Medicaid’s design flaws and lay out what reform should look like. Should Congress eliminate states’ ability to exploit the matching grant system by block-granting Medicaid, as Cato scholar Michael F. Cannon proposes? Or does this leave states fiscally exposed during recessions and create pressure for bailouts that could increase federal spending? Should Congress instead fully federalize core Medicaid benefits, with states funding any expansions beyond that, as the Manhattan Institute’s Chris Pope argues?

With Medicaid fraud and health care affordability making headlines, it is essential for policymakers to improve accountability and control costs. The briefing will examine Medicaid’s structural weaknesses, two competing reform visions, the trade-offs that each entails, and their implications for health care affordability.