This is the Cato Daily Podcast for Wednesday, August 1st, 2007.

I'm Caleb Brown.

Medicaid now consumes 1.5% of U.S. economic output. That's 12% of the federal budget.

The program is on track to consume a growing share of federal spending, crowding out other programs

perhaps entirely.

Cato Institute Senior Fellow Jagadish Gokle says it's time to step on the breaks.

He says the unsustainable growth rate of Medicaid cannot feasibly be funded through tax increases, only limits on Medicaid

spending will be sustainable.

Medicaid has been growing in the past and the pattern of growth is as follows.

It's essentially enrollment goes up during recessions.

As a result, federal outliers and Medicaid go up. But then there's political pressure to help

the population that is susceptible to high health care costs and folks who are low income or have children

dependent on some source of health care service.

So there's pressure to liberalize the rules of the program.

In addition, in the mid-90ss the program rules and eligibility was liberalized

to accommodate folks who were transiting from welfare to work in the aftermath of the welfare reform in 1996.

Well, those liberalizations of eligibility rules and liberalizations of

benefits and coverage became permanently entrenched in Medicaid, in the

corpus of Medicaid rules.

And as a result, the programs outlays did not return back to pre-recession levels even after the

recession was over and the economic boom commenced. So in the past we've seen, especially in the past two recessions,

and after the 1991 recession and the 2001 recession,

...