This is the Cato Daily Podcast for Tuesday, February 6th, 2024.

I'm Caleb Brown.

Medicaid from the very beginning was a program basically designed to grow. And as you might expect is one of the very

largest parts of the federal budget. It perverts state incentives to spend their own

funds reasonably and reflects a lack of concern about controlling spending overall.

Caters Mark Joffy is co-author of a new paper on Medicaid.

We spoke last week.

So if you don't mind Mark, discuss the Medicaid program. It is it's a partnership

arguably that's how it's presented anyway between states and the feds but but how does it

work practically? Yes, it's a federally initiated program going back to 1965, right at the same time that Medicare was started.

And the idea is that the federal government pays a share of medical costs for people on the program and the state pays the rest of it.

And the share varies by how affluent the state is. So a state that has a relatively low per capita income,

like Mississippi, might be near 80% federal share, but an affluent state like California or New York will be closer to 50%.

One of the strongest points I think that you make is that from its inception the Medicaid program was not designed to be

something that was cost-effective in any way.

Yeah, so it has a lot of strange incentives that have caused spending to escalate,

and as you say, it really started right from the beginning.

In 1966, New York State figured out that there was no limit on the income that they could associate

with someone being quote unquote low income.

So they set an income level that brought in, I think about, you know, 35, 40% of the whole state's population into that definition.

And as a result, large numbers of people suddenly became eligible for this program and it far outstripped the federal

projection of how much the federal government was going to spend on it.

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