Welfare Reform Must Include Medicaid

Last year, Representative Paul Ryan (R-Wisc.) unveiled a plan — called “Expanding Opportunity in America” — that would distribute federal funds for anti-poverty programs to the states. But there are two important programs missing from the Ryan plan, says John R. Graham, senior fellow at the National Center for Policy Analysis: Medicaid and the Children’s Health Insurance Program (CHIP).

Ryan’s plan would allow states to apply for “opportunity grants” (OGs), and states receiving the grants would have leeway in how to administer aid programs. But not including Medicaid or CHIP is a mistake. Why?

– Federal spending on the two programs was $274 billion in 2013, whereas the other safety-net programs targeted by Ryan cost $398 billion.
– This means that Medicaid and CHIP alone constitute 41 percent of federal safety-net spending, and these numbers do not include the Obamacare Medicaid expansion, which launched in 2014.
– Medicaid creates a large disincentive to move out of poverty, because it cuts off benefits when incomes rise. As a result, the elimination of Medicaid benefits results in high marginal income tax rates.

Moreover, Graham notes another reason that including Medicaid as part of an OG program is important: incentives. Currently, Medicaid recipients are counted as insured, so increasing the number of Americans on Medicaid increases the insured rate. Rather than reward politicians for moving Americans onto Medicaid rolls, Graham says lawmakers should be rewarded for moving people off of assistance. This is the goal of the Ryan plan, and Medicaid should be part of that plan.

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