With the new Republican budget proposal, there has been a lot talk about cutting Medicaid. Of course, many are worried about how less money will affect the people currently receiving the funds. But I have another question. Where did the money come from? It’s definitely a benefit to those receiving the subsidy. But there is also a cost.

How Medicaid is Funded

According to the Kaiser Family Foundation, states provide the base funding with the federal government giving matching funds up to a certain percentage. 50-77% was described as the base rate, but states get plus ups based on other critera, for example, participation in the Affordable care act, i.e. Obamacare.

The federal government basically gives states incentives to fund Medicaid with a bunch of strings attached. So, in essence, Medicaid is funded by state and federal taxpayers. What’s the difference?

The Real Funding Source of Medicaid

There is no difference. The taxpayers from the 50 states are the same taxpayers to the federal government. So basically, if the Federal portion of Medicaid ended tommorow, state taxpayers would be required to send that much less money to the government. Of course, the Federal government runs an enormous deficit, but that’s for another post.

The Benefits of Eliminating Medicaid

If Medicaid is eliminated, state taxpayers will get to keep their tax dollars. If a state deems it wise to continue funding Medicaid on their own, they need only ask for the tax dollars no long taken by the Federal government. The state taxpayer will be no worse off. In fact, they may be better off through removing the the inefficiency of the federal tax. No longer needing to give money to the federal government and get it back. Restoring the concept of federalism will actually make any attempt to be charitable via government more appealing.

States will now be able to control more tax dollars, more efficiently, for the benefit of those they’re trying to help.